Maria, a single mother, expects to have a taxable income of $55,000 this year. She is considering selling some non-registered investments that would generate a capital gain of $10,000. Assuming her provincial tax rate is simplified to 10% on all income, and the federal tax rates are 15% on the first $53,359 and 20.5% on income above $53,359, what would be her approximate marginal tax rate on the capital gain?

Question: Maria, a single mother, expects to have a taxable income of $55,000 this year. She is considering selling some non-registered investments that would generate a capital gain of $10,000. Assuming her provincial tax rate is simplified to 10% on all income, and the federal tax rates are 15% on the first $53,359 and 20.5% on income above $53,359, what would be her approximate marginal tax rate on the capital gain?

Answer options:

• 12.75% ✅ 15.25%
• 25.5%
• 30.5%

Correct answer: 15.25%

Explanation: A capital gain is 50% included in income. So, $10,000 capital gain adds $5,000 to taxable income. Maria's income would increase from $55,000 to $60,000. The federal marginal rate on this additional income is 20.5%. The provincial rate is 10%. So, the combined marginal rate on the included portion of the gain is (20.5% + 10%) = 30.5%. The marginal tax rate on the capital gain itself is 50% of this combined rate, which is 15.25%.