Marginal Tax Rate in British Columbia (BC): A Comprehensive Guide for 2025 and 2026
The marginal tax rate in British Columbia is the rate of tax you pay on each additional dollar of income you earn. It's crucial to understand that this isn't the overall tax rate you pay on your entire income, but rather the rate applied to the next dollar earned within a specific tax bracket. British Columbia, like the rest of Canada, uses a progressive tax system, meaning the more you earn, the higher the marginal tax rate you pay.
Understanding Tax Brackets and Marginal Tax Rates
Both the Federal government and the British Columbia provincial government impose income taxes. Each level of government has its own set of tax brackets. A tax bracket represents a range of income taxed at a specific rate. As your income increases and moves into a higher tax bracket, only the portion of income within that bracket is taxed at the higher rate.
Federal Tax Brackets (2026 & 2025)
Before diving into BC's specific rates, it's important to understand the federal tax brackets, as these are combined with the provincial rates to determine your total marginal tax rate.
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2026 Federal Tax Brackets:
- Income up to $55,867 is taxed at 15.00%.
- Income between $55,868 and $111,733 is taxed at 20.50%.
- Income between $111,734 and $173,205 is taxed at 26.00%.
- Income between $173,206 and $246,752 is taxed at 29.00%.
- Income over $246,752 is taxed at 33.00%.
2025 Federal Tax Brackets:
These brackets are indexed to inflation. The indexation factor for 2025 is 1.027 (2.7% increase). The specific income thresholds will be slightly higher than 2026. For instance, the lowest bracket, taxed at 15%, expands to $57,375.
British Columbia Provincial Tax Brackets (2026 & 2025)
British Columbia also has its own set of tax brackets and rates, which are added to the federal rates.
2026 British Columbia Tax Brackets:
- Income up to $47,937 is taxed at 5.06%.
- Income between $47,938 and $95,875 is taxed at 7.70%.
- Income between $95,876 and $110,076 is taxed at 10.50%.
- Income between $110,077 and $133,664 is taxed at 12.29%.
- Income between $133,665 and $181,232 is taxed at 14.70%.
- Income between $181,233 and $252,752 is taxed at 16.80%.
- Income over $252,752 is taxed at 20.50%.
2025 British Columbia Tax Brackets:
BC's tax brackets are also indexed to inflation. The indexation factor for 2025 is 1.028 (2.8% increase). For example, the first tax bracket increases to $49,279, taxed at 5.06%.
Combined Federal and BC Marginal Tax Rates
To determine your total marginal tax rate, you need to combine the federal and provincial rates for the applicable income bracket. The tables below illustrate the combined marginal tax rates for 2026 and 2025 in British Columbia, considering different types of income.
2026 Combined Marginal Tax Rates (British Columbia)
| Taxable Income | Other Income | Capital Gains | Eligible Dividends | Non-Eligible Dividends |
|---|---|---|---|---|
| first $47,937 | 20.06% | 10.03% | -9.60% | 10.43% |
| over $47,937 up to $55,867 | 22.70% | 11.35% | -5.96% | 13.47% |
| over $55,867 up to $95,875 | 28.20% | 14.10% | 1.63% | 19.80% |
| over $95,875 up to $110,076 | 31.00% | 15.50% | 5.49% | 23.02% |
| over $110,076 up to $111,733 | 32.79% | 16.40% | 7.96% | 25.07% |
| over $111,733 up to $133,664 | 38.29% | 19.15% | 15.55% | 31.40% |
| over $133,664 up to $173,205 | 40.70% | 20.35% | 18.88% | 34.17% |
| over $173,205 up to $181,232 | 44.02% | 22.01% | 23.46% | 37.99% |
| over $181,232 up to $246,752 | 46.12% | 23.06% | 26.36% | 40.41% |
| over $246,752 up to $252,752 | 49.80% | 24.90% | 31.44% | 44.64% |
| over $252,752 | 53.50% | 26.75% | 36.54% | 48.89% |
2025 Combined Marginal Tax Rates (British Columbia)
| Taxable Income | Other Income | Capital Gains | Eligible Dividends | Non-Eligible Dividends |
|---|---|---|---|---|
| first $49,279 | 20.06% | 10.03% | -9.60% | 10.43% |
| over $49,279 up to $57,375 | 22.70% | 11.35% | -5.96% | 13.47% |
| over $57,375 up to $98,560 | 28.20% | 14.10% | 1.63% | 19.80% |
| over $98,560 up to $113,158 | 31.00% | 15.50% | 5.49% | 23.02% |
| over $113,158 up to $114,750 | 32.79% | 16.40% | 7.96% | 25.07% |
| over $114,750 up to $137,407 | 38.29% | 19.15% | 15.55% | 31.40% |
| over $137,407 up to $177,882 | 40.70% | 20.35% | 18.88% | 34.17% |
| over $177,882 up to $186,306 | 44.02% | 22.01% | 23.46% | 37.99% |
| over $186,306 up to $253,414 | 46.12% | 23.06% | 26.36% | 40.41% |
| over $253,414 up to $259,829 | 49.80% | 24.90% | 31.44% | 44.64% |
| over $259,829 | 53.50% | 26.75% | 36.54% | 48.89% |
Note: The marginal tax rate for dividends is a percentage of the actual dividends received, not the grossed-up taxable amount. The gross-up rate for eligible dividends is 38%, and for non-eligible dividends, it is 15%.
How Marginal Tax Rates Impact Your Tax Bill
It's essential to reiterate that your marginal tax rate is not your average tax rate. Your average tax rate is your total tax liability divided by your total income. The marginal rate only applies to the next dollar you earn. Because of the progressive nature of the tax system, your average tax rate will always be lower than your highest marginal tax rate.
For example, let's say your taxable income in 2026 is $100,000. Based on the combined tables above, your highest marginal tax rate is 31.00% (applicable to income over $95,875 up to $110,076). However, not all of your income is taxed at this rate. The first $47,937 is taxed at 20.06%, the portion between $47,938 and $55,867 at 22.70%, the part from $55,867 to $95,875 at 28.20%, and only the income between $95,876 and $100,000 is taxed at 31.00%.
BC's Basic Personal Amount
British Columbia, like the federal government, offers a basic personal amount, which is a non-refundable tax credit that everyone can claim. This amount represents a portion of income that is not subject to tax.
- 2026 BC Basic Personal Amount: $12,580 (taxed at 5.06%)
- 2025 BC Basic Personal Amount: $12,932 (taxed at 5.06%)
The federal basic personal amount for 2026 is between $14,156 and $15,705 taxed at 15%. For 2025, it will be between $14,538 and $16,129, also taxed at 15%.
Indexation
Tax brackets, as well as several credits and benefits, are adjusted each year to account for inflation. This is referred as indexation. British Columbia uses an indexation factor to adjust these amounts, which is 1.028 (2.8% increase) for 2025. The Federal Government's indexation factor is 1.027 (2.7% increase).
Capital Gains, Dividends and Other Income
The tables above also show the marginal tax rates for different types of income. Capital gains (profit from the sale of assets like stocks or real estate) are taxed at half the rate of other income. Dividends from Canadian corporations receive preferential tax treatment through the dividend tax credit, resulting in lower marginal tax rates. Eligible dividends (generally from larger, public corporations) have a lower tax rate than non-eligible dividends (typically from smaller, private corporations).
Conclusion
Understanding the marginal tax rate system in British Columbia is crucial for effective tax planning. By knowing how your income is taxed at different levels, you can make informed decisions about your finances. Remember that your marginal tax rate applies only to the next dollar you earn, not your entire income. While this guide provides a comprehensive overview, consulting with a tax professional is recommended for personalized advice. Further changes to the tax system, such as a potential update on the Capital Gains Inclusion Rate, could alter these figures. Keep abreast of updates from reliable sources such as TaxTips.ca.
How will you use this information to better understand your own tax situation in BC?
If you want to know other articles similar to Marginal Tax Rate in British Columbia (BC): A Comprehensive Guide for 2025 and 2026y ou can visit the category Marginal Tax Rate & Tax Brackets Canada 2025 - 2024.
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