Things one should know about Canadian tax brackets: Marginal tax v/s average tax
Posted by Accufile on February 4th, 2020
The country of Canada operates on a tax system known as a marginal tax rate system. In simple words this means that more the income earned by the citizens of Canada, the more the tax they are going to pay. Marginal tax is nothing but the tax amount calculated and paid on additional income of the person. The rise in tax rate is directly co-related to the rise in income. Marginal tax is different from a flat tax rate where in a person needs to pay a fixed tax irrespective of his income.
Being well informed about the marginal tax rate can go a long way in helping the person in planning his financial goals and make an easy decision on investments. Mere knowledge about the money one makes is not enough, it is to understand as to how much one can keep, is what matters at the end of the day. Marginal tax rate system helps guide people on how much amount from the earned dollar a person can spend towards maintaining his lifestyle. Persons, planning for retirement goals, should always focus on their net income. There are several websites where you can find sufficient information about Canada Tax brackets.
Income tax in Canada is categorized into two layers, namely, provincial and federal. Marginal tax rate system works by encompassing both federal as well as provincial tax. Also, there is a misconception amongst Canadians, that their entire income will be taxed by way of marginal tax rate system, which is not the case. For example, marginal tax rate of 30.5% is the amount which a tax payer pays on any additional dollar earned up to the next tax bracket. Professional websites also give a good idea about Canada Tax deadline.
The total amount of tax paid by the person through all the brackets is divided by the total income earned by them, which in turn, brings down the marginal tax rate. The tax system in Canada varies from province to province. And, with 10 provinces and 3 territories, calculating the tax rate is a complex affair for the Canadian government. With rules and laws related to taxation system changing frequently due to budgetary factors, the same only adds to the woes of finance department.
When it comes to paying taxes in Canada, one can always take help of online tax calculators, which are simple and free to use. Paying more tax is no way a bad thing, as it means that, one is making more income and money. In Canada, the only solution to avoid paying tax is to make no money. One should always learn about how the tax system works and then use it for their advantage, rather than complaining about things.
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About the AuthorAccufile
Joined: December 17th, 2019
Articles Posted: 17
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