2024 Marginal Tax Rates

Mar 27

Written By Dave

Marginal Tax Rates calculate the amount of combined federal and provincial taxes payable on the next dollar of income. Knowing yours can help you make wise investment choices.

For example, consider a BC resident taxpayer whose taxable income is $160,000. If her investment portfolio generates income, by default that income is taxable. But the taxation varies from 18.88% to 40.70% in her case, depending on what type of income her portfolio creates.

She can reduce her taxes by holding her investments in an RRSP (where contributions are tax-deductible and growth is tax-deferred) or TFSA (which is tax-free) as much as possible. Once those are maxed out, she should direct her other investments toward assets that generate capital gains and eligible Canadian dividends, because they will incur less tax liability (more info HERE).

Marginal tax rates also help to calculate the level of tax savings a taxpayer may receive from RRSP contributions. For example, assume this same BC resident contributes $10,000 to her RRSP. As per the chart, her marginal tax rate is 40.70%. Therefore, she can expect to reduce her tax liability by $10,000 x 40.70% = $4,070. That’s a big win! We recommend you do the same calculation based on your income, and perhaps reduce your tax liability by making an RRSP contribution by March 1.

Remember, it's not about how much you make. It's about how much you keep.