Determined the total marginal tax rate of a British Columbia resident that earned $89,000.

Question

Quizplus · Accepted Answer

To determine the total marginal tax rate, we need to add the federal and provincial/territorial tax rates. 
For a BC resident earning $89,000, the federal tax rate is 20.5% on the first $47,630 and 26% on the amount over $47,630. This means the federal tax payable would be:
($47,630 x 20.5%) + (($89,000 - $47,630) x 26%) = $10,966.65

For BC provincial tax, the rate is 5.06% on the first $41,725, 7.7% on the next $41,726-$83,451, 10.5% on the next $83,452-$95,812 and 14.7% on amounts over $95,812. This means the provincial tax payable would be:
($41,725 x 5.06%) + (($83,451-$41,725) x 7.7%) + (($95,812-$83,452) x 10.5%) + (($89,000 - $95,812) x 14.7%) = $5,921.52

Adding the federal and provincial tax payable amounts and dividing it by the total income gives us the total marginal tax rate:
($10,966.65 + $5,921.52) / $89,000 = 0.3829 or 38.29%

Determined the Total Marginal Tax Rate of a British Columbia