Guide · Tax year 2026
Marginal tax rate versus average tax rate
Your average rate is what you paid across everything you earned. Your marginal rate is what the next dollar costs. They answer different questions, and neither of them is the number printed in a bracket table.
Average rate
The average rate, sometimes called the effective rate, is total income tax divided by gross salary. Because the brackets are progressive, most of your income is taxed at rates below the one your top dollar reaches, so the average is always lower than the bracket. On $150,000 in Ontario the average income tax rate is 26.6%, while the top slice of that salary is taxed at 26% federally and 11.16% provincially before the surtax is added.
The average rate is the honest number for the question a budget asks: what share of my salary goes to income tax. It is the wrong number for deciding whether to take overtime.
Marginal rate
The marginal rate is what a raise, a bonus, an extra shift or an RRSP deduction is worth. It is the slope of the tax curve at the point where you stand, and it is not the bracket rate. Four things in the Canadian system move the real slope away from the statutory rate:
- The Ontario surtax. It is charged on tax payable, not on income. At 20% above the first threshold and another 36% above the second, every extra dollar of Ontario tax drags 56% of surtax behind it. The real provincial slope above the top threshold is about 1.56 times the bracket rate: 11.16% becomes 17.41%.
- The federal basic personal amount phase-out. Between $181,440 and $258,482 the amount slides down as income rises, so each extra dollar also shrinks a credit. That adds about 0.29 of a percentage point to the federal marginal rate across that window, which is why the measured figure at $200,000 below is not a round number.
- Contribution ceilings. Below the pension and employment insurance ceilings the next dollar also gives up 5.95% and 1.63%. Above them it gives up nothing. Those are not income tax, but they come off the same pay cheque.
- Stepped and phased provincial items. The Ontario health premium steps at fixed income points. The British Columbia tax reduction phases out against net income. The Quebec abatement scales the federal component down by 16.5%. Each one bends the curve somewhere a bracket table shows nothing.
Measured, not looked up
Every marginal rate on this site is measured rather than read off a table. The engine computes a full year of tax at your salary, computes another full year at your salary plus one hundred dollars, and divides the difference. A forward difference rather than a centred one, because what you want to know is the slope above where you stand. One hundred dollars rather than one dollar, because the result is quantised to the cent and a one dollar window has a resolution of a whole percentage point.
| Salary | Federal bracket | Ontario bracket | Bracket sum | Measured marginal | Average |
|---|---|---|---|---|---|
| $50,000 | 14.00% | 5.05% | 19.05% | 17.61% | 12.55% |
| $75,000 | 20.50% | 9.15% | 29.65% | 28.46% | 16.94% |
| $100,000 | 20.50% | 9.15% | 29.65% | 31.48% | 20.02% |
| $150,000 | 26.00% | 11.16% | 37.16% | 43.41% | 26.61% |
| $200,000 | 29.00% | 12.16% | 41.16% | 48.27% | 31.48% |
| $250,000 | 29.00% | 13.16% | 42.16% | 49.83% | 35.07% |
| $300,000 | 33.00% | 13.16% | 46.16% | 53.53% | 38.03% |
The fourth column is what a bracket table would tell you. The fifth is what the next hundred dollars actually costs. They are not close. At the top of the table the bracket sum understates the true rate by several points because of the surtax, and lower down it overstates it because the pension deduction and the credits for pension and employment insurance contributions pull the effective federal slope below the statutory rate.
Which one to use
- Budgeting your monthly income: the average rate, or better, just the net figure.
- Deciding what a raise is worth: the marginal rate, or better, the raise calculator, which computes both years in full.
- Deciding what an RRSP contribution saves: neither, exactly. A deduction spans a range of rates rather than sitting at one, which is the subject of how RRSP contributions affect income tax.
- Comparing two provinces: the full calculation in each, because the pieces that differ are not all rates. Use compare.
Related
- How bonuses are taxed
- Gross pay versus net pay
- The full calculation
- Raise calculator
- Ontario in detail
- All guides
Sources
- Current year tax rates and income brackets (2026) · Canada Revenue Agency · checked
- T4032 Payroll Deductions Tables, January 2026 · Canada Revenue Agency · checked
- CPP contribution rates, maximums and exemptions, 2026 · Canada Revenue Agency · checked
- Canada Employment Insurance Commission sets the 2026 Employment Insurance premium rate · Employment and Social Development Canada · checked
Reviewed 2026-08-18