THE GLOSSARY · TAX
Marginal rate
The rate that hits your next dollar, not the ones before it. Crossing a federal bracket in 2026 moves your average rate by sixteen hundredths of a point — and leaves you 82.8% of your raise.
"Careful, you'll move into a higher bracket." You have heard that sentence, and it rests on an error. Your marginal rate is the rate applied to your next dollar earned. Your average rate is your total tax divided by your total income. The two never look alike.
Here are the 2026 federal brackets. They change every year, and your provincial tax stacks on top with brackets of its own.
| Taxable income | Federal rate |
|---|---|
| Up to $58,523 | 14% |
| $58,523 to $117,045 | 20.5% |
| $117,045 to $181,440 | 26% |
| $181,440 to $258,482 | 29% |
| Above $258,482 | 33% |
Take a raise that pushes you over the first threshold: you go from $57,000 to $60,000.
| Income | Federal tax | Average rate | Marginal rate |
|---|---|---|---|
| $57,000 | $7,980.00 | 14.00% | 14% |
| $60,000 | $8,496.01 | 14.16% | 20.5% |
Your federal tax rises by $516.01. You keep $2,483.99, or 82.8% of your raise. And your average rate goes from 14.00% to 14.16% — it moves by sixteen hundredths of a point.
That is the point: the 20.5% rate hits only the $1,477 above the threshold. Your first $58,523 stay taxed at 14%, whatever happens above. The Revenue Agency writes it on its own page: each rate applies only to its bracket, not to your entire income.
Your real marginal rate adds federal and provincial together: the 20.5% above is only half of it. That total is what decides an RRSP — you deduct at today's marginal rate and you will pay at the one on withdrawal. Our TFSA or RRSP breakdown shows that at equal rates, the gap between the two accounts is exactly zero.
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