All the Numbers

Combined marginal tax rates

From the All the Numbers wiki · Tax

A marginal rate is the share of the next dollar of income that goes to tax. It is not the share of all income that goes to tax, which is the average rate. Both are explained in income tax brackets. The marginal rate is the one that values an RRSP deduction, a withdrawal, or a raise.

Ordinary income, 2026

In Ontario the federal rate, the Ontario rate and the Ontario surtax are added into one combined rate. The federal brackets run from 14% to 33%.[1] Ontario's run from 5.05% to 13.16%.[2] Ontario tax above two thresholds is increased by 20% and then by a further 36%, so the Ontario part of the rate is multiplied by 1.2 and then by 1.56.[3]

The published combined rates for 2026, with the surtax included and the Ontario Health Premium left out, are:[4]

Taxable income from Combined rate
$0 19.05%
$53,892 23.15%
$58,524 29.65%
$94,902 31.48%
$107,786 33.89%
$111,811 37.91%
$117,046 43.41%
$150,001 44.97%
$181,441 48.26%
$220,001 49.82%
$258,483 53.53%

Each step is a federal or Ontario bracket starting, or Ontario tax passing a surtax threshold. The step at $117,046 is the federal rate moving from 20.5% to 26%.

Capital gains and dividends

Investment income is taxed differently, so the top rate depends on its kind. For income over $258,482 in Ontario, excluding the health premium:

  • Interest and other ordinary income: 53.53%.[5]
  • Capital gains: 26.76%, which is the 53.53% rate on the taxable half. See capital gains.[6]
  • Eligible dividends: 39.34%, after the gross-up and the dividend tax credit. See dividends.[7]
  • Non-eligible dividends: 47.74%.[8]

What the planner does

The planner does not look these rates up. It works out each person's tax from the brackets, credits and surtax every year, so the marginal rate in a plan is whatever those produce at that income. The brackets grow with inflation after 2026; see tax brackets after 2026.

Because tax is per person, two people in one household can sit on different marginal rates in the same year.

What it does not do

Rates are for Ontario in 2026 only. Credits that fall away as income rises, such as the age amount or Ontario's low-income credits, make the real cost of an extra dollar higher in some income ranges than the table shows. The OAS recovery tax does the same.

See also

  • Age, spouse and caregiver credits · Some credits depend on who you are or who you support. The age amount starts at 65 and shrinks with income; the spouse amount is the basic personal amount less your partner's income. The planner applies the age amount but not the spouse or caregiver credits.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Foreign withholding tax · A foreign country can withhold tax from dividends paid to Canadians; for US dividends the treaty rate is 15%. The foreign tax credit recovers it in a non-registered account, but a TFSA gets no recovery and an RRSP is exempt.
  • How dividends are taxed · Canadian dividends are grossed up by 38% (eligible) or 15% (other), taxed as income, then reduced by a federal and Ontario dividend tax credit. The credits make dividends tax less than interest at the same income.
  • Income tax brackets and your marginal rate · Federal and Ontario tax are each charged in slices of income at rising rates, then reduced by credits, with an Ontario surtax and health premium on top. The marginal rate is what the next dollar costs; the average rate is total tax over income.
  • Ontario's credits for lower incomes · Ontario pays three credits to people with modest incomes. LIFT reduces tax on low earnings, while the sales tax credit and the energy and property tax credit arrive as the Ontario Trillium Benefit.
  • Renting out a suite · Rent from part of your home is taxable income. The costs of the whole home are deductible only for the rented share, mortgage principal and land transfer tax are not deductible, and a loss offsets other income when the rental is run to earn money. A lender may count part of the rent when you apply.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Selling a home · A sale turns the home's projected market value into cash after selling costs of 5.8% and the mortgage payout. The gain on a principal residence is exempt from tax, apart from the part that was rented out when the exemption does not cover it.
  • Spousal RRSPs · A spousal RRSP is held by one partner and funded by the other, who takes the deduction. Withdrawals within three years of a contribution are taxed to the contributor. The planner does not offer one, so each person's RRSP is their own.
  • Tax brackets after 2026 are projected, not published · Every year after 2026 is taxed with the 2026 brackets, personal amounts, credits and CPP/EI ceilings grown at the plan's inflation rate. That is how CRA indexes them, but the real figures are announced each fall and will differ.
  • Taxes are per person · Canada has no joint return, so each of you is taxed on your own income with your own brackets and credits. The routes that do move income between partners — pension splitting, spousal RRSPs, prescribed-rate loans — are not modelled, so a couple's real bill may be lower than this.
  • The OAS recovery tax · Years where net income clears the threshold repay 15% of the excess out of Old Age Security. The projection withholds it from the OAS cash, exactly as the CRA does, and leaves taxable income unchanged.

References

  1. ↑CRA — Canadian income tax rates for individuals (2026); thresholds indexed 2.0% · Federal personal brackets 2026 (14/20.5/26/29/33) · See the source · effective 2026-01-01
  2. ↑CRA — Combined 2026 federal/Ontario rates; $150k/$220k thresholds not indexed · Ontario personal brackets 2026 (5.05/9.15/11.16/12.16/13.16) · See the source · effective 2026-01-01
  3. ↑T4032ON 2026; operative thresholds indexed: 5818 / 7446 · Ontario surtax tiers 2026 (20% over threshold1; +36% more over threshold2) · See the source · effective 2026-01-01
  4. ↑EY — Ontario combined federal and provincial personal income tax rates 2026 · 2026 combined federal + Ontario marginal tax rates (surtax folded in), ordinary income · See the source · effective 2026-01-01
  5. ↑TaxTips.ca Ontario 2026 rates; corroborated exactly by EY Canadian personal tax rates Ontario 2026-06-15 · Ontario top combined marginal rate on ordinary income 2026 (income over $258,482, excl. health premium) · 53.53% · effective 2026-01-01
  6. ↑TaxTips ON 2026 == EY 2026 rate card · Ontario top combined rate on actual capital gains 2026 (53.53% × 50%) · 26.76% · effective 2026-01-01
  7. ↑TaxTips.ca Ontario 2026 rates; corroborated exactly by EY Canadian personal tax rates Ontario 2026-06-15 · Ontario top combined rate on ACTUAL eligible dividends 2026 (income over $258,482, excl. health premium) · 39.34% · effective 2026-01-01
  8. ↑TaxTips.ca Ontario 2026 rates; corroborated exactly by EY Canadian personal tax rates Ontario 2026-06-15 · Ontario top combined rate on ACTUAL non-eligible dividends 2026 (income over $258,482, excl. health premium) · 47.74% · effective 2026-01-01