All the Numbers

Income tax brackets and your marginal rate

From the All the Numbers wiki · Tax

An Ontario resident pays two income taxes on one return: federal and Ontario. Each charges a rate on a slice of taxable income, and the rate rises with each slice. Only the income inside a slice is taxed at that slice's rate, so earning more never lowers take-home pay.

The rules

2026 federal brackets, on taxable income: 14% up to $58,523; 20.5% to $117,045; 26% to $181,440; 29% to $258,482; 33% above.[1]

2026 Ontario brackets: 5.05% up to $53,891; 9.15% to $107,785; 11.16% to $150,000; 12.16% to $220,000; 13.16% above.[2]

  • Basic personal amounts shelter the first part of income as a credit. Federally it is $16,452, falling to $14,829 as net income rises from $181,440 to $258,482; it is credited at 14%.[3][4][5][6][7] Ontario's is $12,989, with no phase-out.[8] Credits tied to age or family are in age, spouse and caregiver credits.
  • Ontario surtax: 20% of Ontario tax above $5,818, plus a further 36% of Ontario tax above $7,446.[9]
  • Ontario Health Premium: nil up to $20,000 of taxable income, rising in steps to $300, $450, $600, $750 and a maximum of $900 above $200,000.[10]
  • A small Ontario tax reduction (a $300 base amount, doubled) removes Ontario tax at very low incomes.[11] Ontario's income-tested credits are in Ontario's credits for lower incomes.
  • The federal Canada employment amount ($1,501) is a further credit for employment income.[12] CPP and EI earn credits and deductions too; see CPP and EI contributions.

Marginal and average rate

average rate  = total tax ÷ income
marginal rate = tax on the next dollar earned

The marginal rate is the federal and Ontario slice rates added together, and once Ontario tax passes the surtax thresholds the Ontario part is multiplied by 1.2, then by 1.56. At the bottom that is 14% + 5.05% = 19.05%. At the top it is 33% + 13.16% × 1.56 = 53.53%; the full ladder is in combined marginal tax rates. The marginal rate is the one that matters for an RRSP deduction or a withdrawal; see RRSP room and deduction. The average rate is always lower.

What the engine does

  • Assesses each person on their own return, using their own income; see taxes are per person.
  • Applies the brackets, credits, surtax and health premium above to every year of the plan, and tests the federal basic personal amount's phase-out against net income.
  • Grows every threshold after 2026 at the plan's inflation rate, as described in tax brackets after 2026. The health premium steps are held flat.
  • Values an RRSP or FHSA deduction at the person's own marginal rate, and taxes a withdrawal as income in the year it is taken.

What it deliberately does not

Only Ontario is modelled, and part-year residence is not. Medical expenses, charitable donations, disability, child-care and similar lines are not modelled.

See also

  • Age, spouse and caregiver credits · Some credits depend on who you are or who you support. The age amount starts at 65 and shrinks with income; the spouse amount is the basic personal amount less your partner's income. All the Numbers applies the age amount, and the spouse amount for a couple; not the caregiver credits.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Combined marginal tax rates · The marginal rate is the federal and Ontario tax on the next dollar of income. In 2026 it runs from 19.05% to 53.53% on ordinary income, and the top rate is lower on capital gains and dividends than on interest.
  • CPP and EI contributions · Canada Pension Plan and Employment Insurance contributions come out of each paycheque up to a yearly ceiling. The plan calculates both from salary, and treats the self-employed as paying both halves of CPP.
  • Land transfer tax · Ontario charges a tax on the price of a home, rising from 0.5% to 2.5% in brackets, and Toronto adds a second one of its own. A first-time buyer gets a refund of up to $4,000 from Ontario and $4,475 from Toronto.
  • Old Age Security · A monthly pension paid to most Canadians from 65, based on years lived in Canada after 18. It can be deferred for a permanent increase, rises 10% at 75 and is partly repaid through a recovery tax at high incomes.
  • Ontario's credits for lower incomes · Ontario pays three credits to people with modest incomes. LIFT reduces tax on low earnings, while the sales tax credit and the energy and property tax credit arrive as the Ontario Trillium Benefit.
  • Renting out part of your home · Suite income is taxable and its expenses are deductible on the rented portion, but renting can also limit the principal-residence exemption on the eventual sale. All the Numbers taxes the gain on the rented share when the home is sold, unless you tick that the rental needed no structural change and you claim no capital cost allowance; then the whole gain stays exempt.
  • RESPs and the education grant · Contributions attract a 20% government grant, up to $500 a year, and $7,200 for a child's lifetime, up to a $50,000 contribution limit. Growth and grants come out taxed in the student's hands, at a rate that is usually near zero.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Self-employment income · A sole proprietor's net business income is taxed on the personal return, with nothing withheld during the year and both halves of CPP owed. The engine can model a simple sole proprietorship; All the Numbers does not ask for one, so plans treat everyone as an employee.
  • Tax brackets after 2026 are projected, not published · Every year after 2026 is taxed with the 2026 brackets, personal amounts, credits and CPP/EI ceilings grown at the plan's inflation rate. That is how CRA indexes them, but the real figures are announced each fall and will differ.
  • Tax withheld from pay, and the April refund · Employers withhold income tax, CPP and EI from each paycheque as an estimate. The real tax is worked out on the return, and the difference arrives or is owed the following April.
  • Taxes are per person · Canada has no joint return, so each of you is taxed on your own income with your own brackets and credits. The routes that do move income between partners — pension splitting, spousal RRSPs, prescribed-rate loans — are not modelled, so a couple's real bill may be lower than this.
  • TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.
  • The alternative minimum tax · A parallel tax calculation that applies a flat rate to a wider measure of income, so someone with a large capital gain cannot owe almost nothing. The higher of the regular and minimum tax is paid, and any extra is carried forward as credit.
  • The CPP retirement pension · A monthly pension from the Canada Pension Plan based on contributions, payable from 60 to 70. Starting earlier cuts it by 0.6% a month, starting later raises it by 0.7% a month. The plan estimates it from a Service Canada statement or from salary.
  • The tuition credit · Eligible tuition fees earn a federal credit at the lowest tax rate. Unused credit carries forward without limit, and a student can pass part of the current year's credit to a spouse or parent. All the Numbers does not ask for tuition, so plans do not include it.
  • Where you live on 31 December · The province where you live on 31 December sets your provincial income tax for the whole calendar year. The plan uses one province for the household in every year, Ontario until you choose one, and does not model a move part way through the plan.

References

  1. ↑CRA — Canadian income tax rates for individuals (2026); thresholds indexed 2.0% · Federal personal brackets 2026 (14/20.5/26/29/33) · See the source · effective 2026-01-01
  2. ↑CRA — Combined 2026 federal/Ontario rates; $150k/$220k thresholds not indexed · Ontario personal brackets 2026 (5.05/9.15/11.16/12.16/13.16) · See the source · effective 2026-01-01
  3. ↑CRA — Indexation adjustment for personal income tax and benefit amounts, 2026: "Basic personal amount (maximum) for individuals whose net income for the year is less than or equal to" the 29% bracket threshold, $16,452 · Federal basic personal amount (maximum, before the phase-out) · $16,452 · effective 2026-01-01
  4. ↑CRA — Indexation adjustment for personal income tax and benefit amounts, 2026: "Basic personal amount for individuals whose net income for the year is greater than or equal to" the 33% bracket threshold, $14,829 · Federal basic personal amount (floor after the full phase-out) · $14,829 · effective 2026-01-01
  5. ↑CRA — Indexation adjustment for personal income tax and benefit amounts, 2026: "Taxable income above which the 29% bracket begins", $181,440 (where the BPA maximum stops) · Federal BPA phase-out start (net income) · $181,440 · effective 2026-01-01
  6. ↑CRA — Indexation adjustment for personal income tax and benefit amounts, 2026: "Taxable income above which the 33% bracket begins", $258,482 (where the BPA minimum starts) · Federal BPA phase-out end (net income; floor applies at/above) · $258,482 · effective 2026-01-01
  7. ↑CRA — 2026 rates (14% lowest rate full-year) · Credit rate applied to the federal BPA (lowest federal rate) · 14% · effective 2026-01-01
  8. ↑TaxTips.ca 2026 Ontario credits · Ontario basic personal amount (no phase-out) · $12,989 · effective 2026-01-01
  9. ↑T4032ON 2026; operative thresholds indexed: 5818 / 7446 · Ontario surtax tiers 2026 (20% over threshold1; +36% more over threshold2) · See the source · effective 2026-01-01
  10. ↑CRA T4032ON Jan 2026 verbatim worksheet lines; ontario.ca/page/health-premium corroborates ($900 only above $200,600) · Ontario Health Premium schedule (statutory, NOT indexed): <=20k $0; to 36k min(300, 6% over 20k); to 48k min(450, 300+6% over 36k); to 72k min(600, 450+25% over 48k); to 200k min(750, 600+25% over 72k); above, min(900, 750+25% over 200k) · See the source · effective 2004-07-01
  11. ↑5006-C ON428 — Ontario Tax · Ontario tax reduction basic amount (ON428 line 73): reduction = 2 × (basic + dependant amounts) − Ontario tax before reduction, floored at zero · $300 · effective 2026-01-01
  12. ↑CRA — Adjustment of personal income tax and benefit amounts: Canada employment amount $1,501 (2026), $1,471 (2025) · Canada Employment Amount (line 31260) — lesser of this and employment income, credited at the lowest rate · $1,501 · effective 2026-01-01