Ontario Marginal vs Average Tax Rate

The one idea that matters

Canada taxes income in brackets. Your marginal rate is the tax on your next dollar of income. Your average rate is your total tax divided by your total income. The marginal rate is always higher than the average rate — and confusing the two is behind almost every tax myth, including the classic "a raise will push me into a higher bracket and I'll take home less."

That last one is never true for ordinary employment income: only the dollars inside the higher bracket are taxed at the higher rate. Everything below keeps its lower rate.

Worked example: $60,000 in Ontario (2026)

Simplified estimate using 2026 federal and Ontario brackets and basic personal amounts (no other credits or deductions):

On $60,000 you keep about 85 cents of every dollar on average — but a $5,000 raise nets only about $3,518, because the raise is taxed at the 29.65% marginal rate. Both numbers are correct; they answer different questions.

Marginal rates at a glance (Ontario, 2026)

• $60,000: ≈ 29.65% — 20.5% federal + 9.15% Ontario.
• $100,000: ≈ 31.48% — Ontario's 20% surtax starts applying once provincial tax passes $5,818.
• $135,000: ≈ 43.41% — federal 26% bracket plus the full surtax effect.
• $190,000: ≈ 48.26% — 29% federal + 12.16% Ontario with surtax.

Use the marginal rate for decisions — overtime, a bonus, or an RRSP contribution (a $10,000 RRSP contribution at a 43.41% marginal rate saves about $4,341 in tax). Use the average rate to understand your overall burden.

Key points

• Marginal rate = tax on the next dollar. Average rate = total tax ÷ total income.
• A raise can never reduce your take-home pay — only the slice inside the higher bracket is taxed more.
• Figures are simplified 2026 estimates. Your CRA notice of assessment is the official record.

Related tools

Ontario Salary Calculator · TFSA Calculator · RRSP Calculator · Mortgage Calculator