Canada uses a progressive tax system, which means someone’s tax rate increases the more money they make (this seems fair, unless you ask a billionaire). The progressive tax system is true for both federal and provincial/territorial taxes, which each have their own unique tax brackets, just to keep you on your toes. Income tax in Canada is based on your taxable income, which is your total gross income from all sources, minus eligible deductions.
Provincial/territorial taxes are based on your province or territory of residence as of December 31. For example, if you’re filing 2024 taxes and you lived in Alberta to start the year before moving to Ontario in October, you’ll be subject to Ontario income tax (in addition to federal taxes everyone in Canada pays).
What are Ontario's 2024 tax brackets and rates?
These are the provincial tax rates for tax year 2024 in Ontario according to the Canada Revenue Agency (CRA):
2024 Ontario income tax brackets | 2024 Ontario income tax rate |
|---|---|
| first $51,446 | 5.05% |
| over $51,446 up to $102,894 | 9.15% |
| over $102,894 up to $150,000 | 11.16% |
| over $150,000 up to $220,000 | 12.16% |
| over $220,000 | 13.16% |
What are Canada's Federal 2024 tax brackets and rates?
The following are the federal tax rates for tax year 2024 according to the Canada Revenue Agency (CRA):
2024 federal income tax brackets | 2024 federal income tax rates |
|---|---|
| $55,867 or less | 15% |
| $55,867.01 to $111,733 | 20.5% |
| $111,733.01 to $173,205 | 26% |
| $173,205.01 to $246,752 | 29% |
| More than $246,752 | 33% |
How do I calculate income tax in Ontario?
If you want to get a rough estimate of how much income tax you owe on your taxable income, first calculate your federal income tax, then calculate your provincial tax, and finally, add the amounts together. If you divide that amount by your income, you’ll arrive at your average tax rate. This is the percentage of tax you pay on every dollar you earn. Let’s assume you’re making $45,000 a year, you have no deductions, and your only tax credit is the basic personal amount. You’re only going to fall into the bottom tax bracket both federally and provincially, so you’re going to pay 15% tax to the federal government and 5.05% provincially.
$45,000 x 15% = $6,750 (federal taxes)
$45,000 x 5.05% = $2,272.50 (Ontario taxes)
Total income tax on taxable income: $6,750 + $2,272.50 = $9,022.50 total combined federal and provincial taxes.
Your federal basic personal tax credit will give you a federal tax break of $2,355.75 and your provincial personal amount will result in a tax credit of $626.15. So let’s combine your tax credits and subtract from your tax owing. $9,022.50 - ($2,355.75 + $626.15) = $6,040.60
If you divide that final tax amount by your income of $45,000, you’ll find your average tax rate is 13.4%, meaning that for every dollar you earn, 13.4 cents go to the government.
You might be thinking, “OK, I know that I’m getting a $100 bonus from work this week, so I’ll have to give up 13.4% to the tax man, right?”. Well not quite. You already used up your basic personal amount. Plus, as we’ll get into below, this gets even more complicated if you fall into multiple tax brackets.
So how do you know how much of your bonus you’re actually going to get to keep? You need to find your marginal tax rate. That’s the amount of tax you’ll pay on new income. To do this, you’re going to add together the highest federal and provincial tax brackets that you fall into. So since you’re in the bottom brackets, that'll be 15% and 5.05% like we talked about above.
15%+5.05% = 20.05%, your marginal tax rate.
So now you know that you can’t spend all that bonus in one place, you’ll have to fork over $20.05 from your $100 to the CRA sooner or later. One confusing detail to note: In a progressive tax system, your income tax payable is cumulative. That means that depending on what tax bracket your taxable income falls in, you could be paying multiple rates of tax.
To see this in action, let’s say you have a taxable income of $60,000. Here’s how you would figure out your taxes:
Calculating the federal tax bill. Based on the updated 2024 federal tax rates, the first $55,867of your income is taxed at 15%, which works out to $8,380.05. Taking your total income ($60,000) and subtracting the first income tax bracket ($55,867), you have $4,133 of unaccounted-for income remaining. That amount will be taxed at a higher rate of 20.5%, which is $847.27. This means the total you owe in federal tax is $8,380.05 + $847.27, so $9,227.32.
Calculating the provincial tax bill. As a resident of Ontario, to find your provincial tax, you’d be required to pay 5.05% tax on $51,446 in income, which is $2,598.02. You still have $8,554 in income unaccounted for, which will be taxed at a higher rate in the second Ontario tax bracket (9.15%), which works out to $782.69. That means your total amount owing in provincial taxes is $3,380.71.
Calculating the total tax bill. Combine federal and provincial taxes you owe: add what you owe federally ($9,227.32$) and what you owe to Ontario ($3,380.71), for a total of $12,608.03. What a deal for getting to live in this beautiful, freezing place!
How can I reduce my income tax in Ontario?
Check out these ways to cut down on how much tax you’ll owe as an Ontario resident through deductions or credits (note: asking nicely to pay less doesn’t work; we’ve tried).
Tax Credits
Finally, a word we love to hear whether we’re spending on trousers or taxes: discounts! The most common federal non-refundable tax credits are things like the basic personal amount, medical expenses, and charitable or political donations.
Most taxpayers in Canada are eligible to claim the federal basic personal amount (BPA) of $15,705 on their 2024 taxes, which reduces taxable income, if their net income is $173,205 or less. (For income above $173,205, the BPA is gradually reduced, stopping at $14,156 for those with a net income of $246,752 or more.) In ON, you are also eligible to claim a provincial basic personal amount of $12,399. There are additional credits for seniors, for people who have a qualifying disability, or for those caring for a person with a disability.
Also, if your income is less than $15,705 for 2024, you shouldn’t have to pay any income tax. You should still file your taxes, though. All kinds of federal and provincial/territorial programs, such as the GST/HST credit, are based on your income as reported on your income tax return.
Non-refundable tax credits reduce the amount of tax you have to pay, but you are only eligible to claim them if you owe taxes. In other words, you need to have earned some kind of income. For non-refundable tax credits, you can claim only as much as would reduce your taxes to zero, but you don’t get the excess as a refund.
So if you owe $4,000 in taxes, and you have $4,500 in non-refundable tax credits, you can claim $4,000, but you don’t get $500 as a refund. In some circumstances, unused credits such as tax credits for tuition, your student loan interest and donations can be carried forward for future years.
Refundable tax credits also reduce the amount of tax you have to pay, but unlike non-refundable tax credits, once you’ve reduced your taxes to zero, the excess is refunded to you.
To check if there are tax credits you may be eligible for, have a look here or call the CRA at 1-800-959-8281.
Tax Deductions
A tax deduction reduces your taxable income, lowering the amount of income you will be taxed on. The CRA provides detailed information on both federal and province/territory specific deductions. Deductions exist for Canadian Armed Forces personnel and police members, Registered Pension Plan (RPP) holders, RRSP contributors, and more. There may be others that you qualify for. Check this list or call the CRA at 1-800-959-8281.
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