Here is what you need to know about average tax vs marginal tax

Submitted by PEBA on December 28, 2021

Income TaxWhen it comes to financial planning, having a general idea of your average and marginal rate is helpful. It gives you an idea of how much money will be yours to spend, save, and invest.

The average tax rate measures your tax burden — the percentage of income you pay in taxes. It’s calculated by taking the total tax you paid and dividing it by your total income. It’s an accurate reflection of overall tax liability.

The marginal tax rate is the tax rate you pay on an additional dollar of income. The marginal tax rate for individuals increases as income rises. This method, known as progressive taxation, aims to tax individuals based upon their earnings.

Let’s look at an example, say your taxable income for 2021 will be $100,000. Your marginal tax will be:

Combined Saskatchewan/Federal marginal tax rates using 2021 taxable salary of $100,000

Tax brackets Salary 2021 Income Tax Rates Amount
    Federal (%)  
$49,020 or less $49,020 15.0 $7,353
$49,020 up to $98,040 $49,020 20.5 $10,049.10
$98,040 up to $151,978 $1,960 26.0 $509.60
$151,978 up to $216,511 - 29.0 -
more than $$216,511 - 33.0 -
Total Salary $100,000    
    Saskatchewan (%)  
$45,677 or less $45,677 10.5 $4,796.08
$45,677 up to $130,506 $54,323 12.5 $6,790.37
more than $130,506 - 14.5 -
Total Salary $100,000 Marginal tax owing for 2021 $29,498.15

Your average tax calculation based on the above amounts:

$29,498.15 ÷ $100,000 = 29% average tax rate.

Knowing your marginal and average tax is key to making good financial decisions.  Our Retirement Information Consultants who are CERTIFIED FINANCIAL PLANNER® or QUALIFIED ASSOCIATE FINANCIAL PLANNER™ professionals are here to help with your financial literacy journey.


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