Personal Finance

Marginal Tax Rates- in Ontario?

  • Last Updated:
  • Jan 27th, 2021 9:52 pm
Tags:
[OP]
Deal Addict
Dec 26, 2009
2776 posts
1445 upvotes

Marginal Tax Rates- in Ontario?

Doing a bit of research, I looked up the marginal tax rates for Ontario. When I add up the marginal Federal and Ontario rates, I can't come to the same combined marginal rate as the charts posted online, and am hoping someone can explain why.

I found the same info on many sites, but am quoting rates from https://kalfalaw.com/marginal-tax-rates ... ncome-tax/

Federal Marginal Rates 2020:

15% on the first $48,535 of taxable income, plus
20.5% on the next $48,534 of taxable income (on the portion of taxable income over 48,535 up to $97,069), plus
26% on the next $53,404 of taxable income (on the portion of taxable income over $97,069 up to $150,473), plus
29% on the next $63,895 of taxable income (on the portion of taxable income over 150,473 up to $214,368), plus
33% of taxable income over $214,368

Ontario Marginal Rates 2020

5.05% on the first $44,740 of taxable income, plus
9.15% on the next $44,742, (on the portion of taxable income over $44,740 up to $89,482), plus
11.16% on the next $60,518, (on the portion of taxable income over $89,482 up to $150,000), plus
12.16% on the next $70,000, (on the portion of taxable income over $150,000 up to $220,000), plus
13.16 % on the amount over $220,000

They also have a table that combines provincial and federal rates https://kalfalaw.com/wp-content/uploads ... 1.png.webp which shows the same combined marginal rates of other sites.

The problem is, I can't always reach the combined marginal rates they have posted.

For an income of $40,000, I can see that 15% federal + 5.05% Ontario = 20.05% as indicated on the combined rate chart.

For an income of $80,000, I would expect 20.5% federal + 9.15% Ontario = 29.65% but the combined rate chart shows 31.48%

For an income of $120,000, I would expect 26% federal + 11.16% Ontario = 37.16% but the combined rate chart shows 43.41%

What am I doing wrong or not properly accounting for?

edit - made typo in my last example
Last edited by RubberCheese on Jan 27th, 2021 10:04 pm, edited 2 times in total.
2 replies
Deal Fanatic
Nov 24, 2013
6213 posts
2959 upvotes
Kingston, ON
Income tax in Ontario has what’s called a “surtax” component, where the nominal Ontario tax rate (doesn’t affect the federal rate) is grossed up by a percentage. It’s a relic of how income tax worked in the ~80s when provincial income tax was a percentage of your federal tax liability.

Without getting into the details of how the surtax works, I will say the marginal tax rate at Taxtips.ca is accurate based on the standard Basic Personal Amount tax credit: https://www.taxtips.ca/taxrates/on.htm
[OP]
Deal Addict
Dec 26, 2009
2776 posts
1445 upvotes
Mike15 wrote: Income tax in Ontario has what’s called a “surtax” component, where the nominal Ontario tax rate (doesn’t affect the federal rate) is grossed up by a percentage. It’s a relic of how income tax worked in the ~80s when provincial income tax was a percentage of your federal tax liability.

Without getting into the details of how the surtax works, I will say the marginal tax rate at Taxtips.ca is accurate based on the standard Basic Personal Amount tax credit: https://www.taxtips.ca/taxrates/on.htm
THANK YOU! I've never heard of the surtax (or if I did, assumed it was the health premium or something else).

For anyone else wondering, the Ontario surtax rate will increase the posted Ontario income tax rates by either 20% or by a total of 56% depending on your total payable tax.

In my example of calculating marginal income for an income of $120,000, using 26% federal + 11.16%*1.56=17.4096% Ontario = 43.41% as shown on the combined rate charts.

Thanks again @Mike15 , I also found https://calculatorscanada.ca/ontario-in ... alculator/ helpful to explain the surtax... https://www.yanniel.info/2017/03/how-to ... urtax.html is also good.

Top