Tax rates vary by amount of income, province of residence and type of income.You must also distinguish between marginal tax rate and average tax rate. In Canada, the marginal income tax rates on salaries and wages range 0% for very low income to a top rate of 54%. The ranges vary greatly by province. All provinces have several different tax brackets for different levels of income. When your income falls within a particular bracket, it does not mean that all you income is taxed at that rate, it means that only the amount of your income which falls in the bracket is taxed at that level.
Salaries, employment income, pension income, rental property income, interest income and business income are all taxed at the same rates foe an individual’s given income level. Special tax treatment is given to dividends and capital gains. As part of the integration between corporate income taxes and individual taxes, dividends are taxed at a lower rate than income such as salaries. In simple terms, the individual is given credit for income taxes already paid by the corporation on the same income. Capital gains tax rates have varied over the years and currently enjoy a low rate of tax as compared to other types of income. The rate is generally a result of the current government’s fiscal policy.Prior to 1972, there were no taxes on capital gains. The rates were as high as 75% of the tax rate on salaries to the current 50% of the tax rate on salaries. There are many special and complex rules with respect to capital gains which should be discussed with your accountant if you have sold any kind of investment or real property during the year.
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