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Marginal tax rates for Ontario and Quebec for 2014*

February 12, 2015 by  
Filed under Debt management, Income Tax

As tax filing time approaches and so does the RRSP contribution deadline for 2014, it is a good time to review a few concepts.

Your marginal tax rate (MTR) is the tax on your next dollar of income. This is different from your average tax rate, which is the ratio of total tax to total income.  For example, if you earn $100,000 you might pay $30,000 of income tax and have an average tax rate of 30% but your marginal tax rate in Ontario is 43.41% and in Quebec is 47.46%.

If you are thinking of a last minute RRSP contribution and have already made some contributions, you can use your MTR to calculate how much more you can contribute using cash or a loan in order to end up with no refund or tax owing.  Just use the formula:

Contribution = (MTR x existing contribution)/ (1-MTR).  Thus, if your MTR is 30% and you have already contributed $5,000 you could use cash or borrow $2,143 to contribute and the tax refund should equal your new amount invested or enable you to fully repay your RRSP loan.


Ontario and Quebec MTRs 2014

Source: Mackenzie Financial Tax and Estate Planning


* HollisWealth does not offer tax or legal advice.  Working with your team of experts we are able to provide a suite of financial services for clients. We recommend that individuals consult with their professional tax and/or legal advisor before taking any action based upon this information.

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