Marginal and average are not the same
Canada taxes income in bands. Each band has its own rate, and only the dollars inside a band pay that band's rate. Moving into a higher bracket never makes your whole income taxed at the higher rate.
- Your marginal rate is the rate on your next dollar.
- Your average rate is your total tax divided by your income. It's always lower.
2026 federal brackets
Up to $58,523
Rate: 14%
$58,523 to $117,045
Rate: 20.5%
$117,045 to $181,440
Rate: 26%
$181,440 to $258,482
Rate: 29%
Over $258,482
Rate: 33%
2026 Ontario brackets
Up to $53,891
Rate: 5.05%
$53,891 to $107,785
Rate: 9.15%
$107,785 to $150,000
Rate: 11.16%
$150,000 to $220,000
Rate: 12.16%
Over $220,000
Rate: 13.16%
Ontario also adds a surtax once your basic Ontario tax passes certain amounts, which pushes the combined rate up at higher incomes.
Combined rates at common incomes
$45,000
Combined marginal rate: 19.05%
$80,000
Combined marginal rate: 29.65%
$100,000
Combined marginal rate: 31.48%
$110,000
Combined marginal rate: 33.89%
$130,000
Combined marginal rate: 43.41%
These are estimates from the brackets, the basic personal amounts and the Ontario surtax. They leave out other credits, the Ontario Health Premium and the low-income tax reduction.
Why it matters
A deduction saves tax at your marginal rate. A $1,000 RRSP or FHSA deduction at a 29.65% marginal rate lowers your tax by about $297. At 43.41%, it's about $434. That's why the same contribution can be worth more to one person than another.
How the RRSP refund is worked out