March 8, 2015

What is a Marginal Tax Rate?

A Marginal Tax Rate (MTR) is the tax rate (%) paid on each additional dollar earned. It is called ‘Marginal’ as it refers to the next incremental dollar earned. The tax rates change with higher income. The more income, the likely the tax rate is higher. Federally, there are currently (2014 tax year) four tax brackets: Pay 15% on the first $43,953. Pay 22% on every extra dollar between $43,953 and $87,907, and so on for two higher brackets. Provincially, there are many more tax brackets. This means a smaller increase in income is more likely to lead to an increase in […]
October 15, 2013

Two Corporate Tax Brackets

In Canada, there are two tax brackets for incorporated business income. The lower one, Small Business Deduction (SBD) rate is about 15%. The SBD is on the first $500,000 of income (up until a few years ago it was $400,000). Above $500,000 of income, the second ‘tax bracket’, the corporate rate is 26.5%. To illustrate: between $400K and $500K of income, $15,000 is tax payable. Between $500K and $600K of income, $26,500 is tax payable. This is a huge jump of 76.67%!  However, due to the system of integration, the taxation activity flows down to the individual level when cash […]