# Marginal vs Average Tax Rate in Canada, Explained > The difference between your marginal and average tax rate in Canada, how to work out each, and which to use for raises, bonuses, RRSPs and side income. Source: https://trykosh.com/learn/marginal-vs-average-tax-rate Guide - Income tax # Marginal vs average tax rate: which one matters, and when On a $100,000 Ontario salary, the next dollar is taxed at about 31.5% but the average across all income is only 20%. Mixing those two numbers up is behind a lot of bad tax decisions. Here's how each works. Updated October 31, 20263 min readBy the Kosh team On this page[The short answer](#short-answer)[Worked example: three Ontario salaries](#example)[How do I find my marginal tax rate?](#find-yours)[When the marginal rate is the one to use](#use-marginal)[When the average rate is the one to use](#use-average)[Can a raise push me into a higher bracket and cost me money?](#bracket-myth)[FAQs](#faq) ## The short answer - **Marginal rate**: the combined federal and provincial tax on your next dollar of income. Use it for decisions at the edge: a raise, a bonus, side income, an RRSP or FHSA deduction. - **Average (effective) rate**: total income tax divided by total income. Use it to understand your overall tax burden or compare years. ## Worked example: three Ontario salaries Ontario employment income, 2026 (Kosh estimates; income tax only, excluding CPP and EI) Salary Income tax Average rate Marginal rate $60,000 $8,320 13.9% 29.6% $100,000 $20,024 20% 31.5% $150,000 $39,911 26.6% 43.4% The average rate climbs slowly because the lower brackets and the basic personal amounts apply to everyone. The marginal rate jumps in steps as you cross each federal and provincial threshold, and in Ontario the surtax adds extra steps. ## How do I find my marginal tax rate? Find your taxable income's federal bracket and your province's bracket in our [2026 tax brackets guide](/learn/canadian-tax-brackets-2026) and add the two rates. That's close, but not exact: surtaxes, the shrinking federal basic personal amount at high incomes, the Ontario Health Premium and benefit clawbacks can all add to the true marginal rate. The most reliable way is to calculate your tax twice, with and without an extra $1,000, which is what our calculators do. ## When the marginal rate is the one to use - **RRSP and FHSA deductions** save tax at your marginal rate. A $10,000 RRSP contribution on a $100,000 Ontario salary cuts tax by about $2,991; on $60,000 it saves about $2,192. - **Bonuses and side income** are taxed at your marginal rate, which is why a bonus can feel heavily taxed even though your average rate barely moves. - **Capital gains**: half the gain is added to income, so the effective rate on a gain is about half your marginal rate. - **Benefits**: the Canada child benefit, OAS and others shrink as income rises, so the real marginal rate for some families and retirees is higher than the brackets show. ## When the average rate is the one to use The average rate tells you what share of your income goes to income tax overall. It's useful for budgeting, for comparing provinces if you're considering a move, and for sanity-checking your pay stub. It's the wrong number for judging whether a deduction is worth it. ## Can a raise push me into a higher bracket and cost me money? A raise can never cost you money through income tax alone, because only the dollars above a threshold are taxed at the higher rate. Where people do lose ground is with income-tested benefits: if a raise reduces your Canada child benefit or pushes retirement income over the OAS recovery threshold, the combined effect can be steep. That's a reason to plan RRSP deductions and the timing of income, not to turn down a raise. [Free tool**Marginal tax rate calculator**See how much of your next dollar goes to tax in your province, on salary and interest, capital gains and dividends. It's the number that decides what an RRSP contribution saves and what a raise is worth.](/tools/marginal-tax-rate-calculator)[Free tool**Income tax calculator**Work out your 2026 federal and provincial income tax, CPP and EI, and what you keep, in any province or territory. Add self-employment income, capital gains and RRSP contributions to see how each one changes the bill.](/tools/income-tax-calculator)[Free tool**RRSP tax refund calculator**Find out how much tax an RRSP contribution saves you this year, and what it really costs once the refund comes back.](/tools/rrsp-calculator) **Where Kosh fits** Kosh measures your actual marginal rate from your own income, province, RSUs and side income, then uses it to rank your options: whether an RRSP or TFSA dollar goes further for you, and what a bonus or vest will really leave you. ## Frequently asked questions What is a marginal tax rate in Canada? It's the combined federal and provincial tax rate on your next dollar of income. It depends on your province and your taxable income, and includes surtaxes and credit phase-outs. What is the average tax rate? Your total income tax divided by your total income. It's always lower than your marginal rate because the lower brackets and basic personal amounts apply to everyone's first dollars. Which tax rate do RRSP contributions save? Your marginal rate. Each dollar deducted removes a dollar taxed at the top rate you reach, so RRSP deductions are worth more at higher incomes. Why is my bonus taxed so much? A bonus is added on top of your salary, so all of it is taxed at your marginal rate. Employers withhold on bonuses with a lump-sum method, so the withholding can differ from the final tax; the difference is settled when you file. Can a raise reduce my take-home pay in Canada? Not through income tax brackets alone. It can reduce income-tested benefits such as the Canada child benefit, which raises your effective marginal rate, but the raise still leaves you ahead in almost all cases. ## Sources - [CRA: Tax rates and income brackets for individuals](https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html) - [CRA: T4127 Payroll Deductions Formulas](https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4127-payroll-deductions-formulas.html) Written by the Kosh team and checked against the rules in force on October 31, 2026. This guide is general information, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not registered with any Canadian securities regulator as an adviser or dealer, does not recommend specific securities, and does not hold your money or execute trades. Tax figures are estimates; confirm with the CRA or a qualified professional before acting. Investing carries risk. ## Upload your statement and Kosh does this for you. Kosh reads your bank, card and investment statements, estimates your federal and provincial tax and turns guides like this one into your own numbers and next steps. [Start free](/signup?via=learn-marginal-vs-average-tax-rate)