The federal and Ontario government each levy and collect income tax. However, the taxes are combined so that the tax payer only files one tax return, and pays the combined tax total which the governments then divide. The amount of tax you are required to pay will depend on the amount of income you earned during the year and the deductions and credits you claimed. In most cases, you are also required to pay tax on investment income earned in the year even if it is not received until the next calendar year. Personal and business tax issues are vast and complicated. To get help, ask a lawyer now.

Tax rates and tax brackets

Depending on the amount of income you earn, you will fall within one of five federal tax brackets, and one of the five Ontario tax brackets. Each tax bracket is taxed at a different rate. The system is based on what is called graduated tax rates. This means that if your income increases so that you enter a new tax bracket, only the amount of your income that falls in the higher tax bracket gets taxed at the higher rate. Tax brackets are set by both the federal government and by each province.

2023 tax rates:

Federal

• 15% on the first $53,359 of taxable income
• 20.5% on portion over $53,359
• 26% on portion over $106,717
• 29% on the portion over $165,430
• 33% of taxable income over $235,675

Ontario:

• 5.05% on the first $49,231 of taxable income
• 9.15% on portion over $49,231 up-to $98,463
• 11.16% on portion over $98,463 up-to $150,000
• 12.16% on portion over $150,000 up-to $220,000
• 13.16% on the amount over $220,000

2024 tax rates:

Federal

• 15% on the first $55,586 of taxable income
• 20.5% on portion over $55,586
• 26% on portion over $111,733
• 29% on the portion over $173,205
• 33% of taxable income over $246,752

Ontario:

• 5.05% on the first $51,446 of taxable income
• 9.15% on portion over $51,446 up to $102,894
• 11.16% on portion over $102,894 up to $150,000
• 12.16% on portion over $150,000 up-to $220,000
• 13.16% on the amount over $220,000

Combined tax rate

The federal and provincial tax rates, added together, is called the combined tax rate. In addition to the combined rate there are surtaxes that primarily apply to incomes in the highest tax bracket. The combined provincial and federal tax rate ranges from approximately 20% for taxable income in the lowest tax bracket, to approximately 53% for income in the highest tax bracket. Also, individuals with taxable income over $20,000 are required to pay a Health Premium each year.

Reducing tax payable: deductions and credits

There are two main ways to reduce the amount of tax you pay: by claiming deductions and by claiming tax credits.

Deductions are amounts you can subtract directly from your income before calculating tax. There are not as many deductions for individuals earning employment income, in comparison to individuals who carry on a business. However, some common deductions for individuals include: support payments made to an ex-spouse, contribution amounts to an RRSP up-to your annual maximum, and moving expenses, if you had to move more than 40 kilometres because of work.

Tax credits work differently from deductions in that they are subtracted from the amount of tax you owe, as opposed to your income before taxes. The most common credit that everyone can claim is a basic personal tax credit, which allows you to subtract an amount set by the government.

Tax credits work differently from deductions in that they are subtracted from the amount of tax you owe, as opposed to your income before taxes. The most common credit that everyone can claim is a basic personal tax credit, which is the amount an individual can earn before paying any federal income tax.

Federal basic personal amount

For individuals whose net income for the year is less than or equal to the amount at which the 29% tax bracket begins:

• for the 2023 tax year: $15,000
• for the 2024 tax year: $15,705

For individuals whose net income for the year is less than or equal to the amount at which the 33% tax bracket begins:

• for the 2023 tax year: $13,520
• for the 2024 tax year: $14,156

There are also provincial basic personal tax credit amounts, set by each province. In Ontario, it is $11,865 for 2023. For the 2024 tax year, it is $12,399.

For more information, go to 1700 What are tax deductions, credits and benefits?

When must tax be paid?

Generally, tax must be paid throughout the year, as it accrues. Most employers deduct an amount for taxes from your paycheques, and submit it to the federal government on your behalf. If your employer has not deducted enough during the year, you will have to pay tax when you file your tax return. If your employer deducted too much because you have deductions or credits to claim, you will usually get money back after you file your return for the year.

Many people prepare their own tax returns either by carefully following the steps in the tax return packages provided by CRA, or by purchasing a computer program that will ask you to input information and then calculate your taxes.

Get help

For advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP

Personal and business tax issues are vast and complicated. To get help, ask a lawyer now.

								
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