Published by Beaver Ledger · Edited
Income tax ideas with made-up numbers. Benefit changes and CPP and EI aren't included.
The question
Which rate should I use for a raise or a deduction?
Your marginal rate: the tax rate on your next dollar of taxable income. Your average rate is your total income tax divided by your income. Use the marginal rate for a decision about extra income or a deduction, and the average rate to describe your whole year.
The average rate looks back
Say you earned $60,000 and your income tax for the year was $12,000. Your average rate is 20%. That tells you nothing about the tax on another $1,000. When you see an average rate, check whether it's based on gross or taxable income.
Example: the next $1,000
Now say that extra $1,000 falls in a combined 30% band. The tax on it is $300, even though your average rate is 20%. Using the average would predict $200 and get it wrong.
These rates are made up for teaching, not real Canadian brackets. If the extra income crosses a bracket line, split it between the two rates.
Rates aren't the whole story
Federal and provincial brackets add up to your marginal rate. Surtaxes, credits that shrink as income rises and benefits that get reduced can all change what you actually keep. CPP, EI and family benefits matter too, and a simple sum of two rates misses them.
Compare before and after
For a large RRSP deduction, compare your full tax with and without it instead of multiplying by your top rate. For donations, use the donation credit rates; a personal donation isn't a deduction valued at your marginal rate.
Sources checked for this editorial revision on October 3, 2026. Educational content from Beaver Ledger; no professional review is claimed. Methods and limitations · Editorial practices and corrections.