The calculation of the Ontario’s Surtax is a two-step process:
First, you calculate the Basic Provincial Tax on your personal income. Second, you take the Basic Provincial Tax calculated in the first step and do some math (we’ll explain that shortly) to calculate the Ontario’s Surtax. What’s important here to understand is that the surtax is calculated not on your income, but on your Basic Provincial Tax.
The provincial tax rates and income thresholds for the Province of Ontario for 2016 are follows:
|Annual taxable income ($)||Provincial tax rate (%)|
|0.00 to 41,536.00||5.05%|
|41,536.01 to 83,075.00||9.15%|
|83,075.01 to 150,000.00||11.16%|
|150,000.01 to 220,000.00||12.16%|
|220,000.01 and over||13.16%|
Also, everybody in Ontario is entitled for a basic personal tax credit return. This number can be found in row number 1 of the TD1ON form for the corresponding tax year. This number is $10,011 for tax year 2016.
Knowing the tax brackets above, your personal income and the basic personal tax credit amount, then you can calculate your Basic Provincial Tax in Ontario. We call it “Basic”, because it does not include the surtax amount yet. Your Total Provincial Tax would be the sum of the Basic Provincial Tax plus the Ontario Surtax.
A person making $60,000 owes $3,282.00 in the form of Basic Provincial Tax in Ontario. To calculate this number we apply the tax brackets above as follows:
= 0% * $10,011 + 5.05% * ($41,536 - $10,011) + 9.15% * ($60,000- $41,536.01)
= 0% * $10,011 + 5.05% * $31,525 + 9.15% * $18,463.99
= $0 + $1,592.0125 + $1,689.455085
= $3282 (rounding up to the nearest integer)
So, $3282 is the Basic Provincial Tax of a person making $60,000 annually.
Doing some similar math we can calculate the Basic Provincial Tax for other incomes. I am not going to do all the calculations again, but they will be awfully similar to the one we just did. I’ll just spit the numbers now but you can double check them later:
|Personal Annual Income ($)||Basic Provincial tax (not including the surtax yet)|
Now let’s calculate the Ontario Surtax:
If your Basic Provincial Tax is less than $4,484, then your surtax is $0. That means that a person with a $60,000 income won’t pay any surtax just because its Basic Provincial tax is $3,282 and that number is less than $4,484.
If your Basic Provincial Tax is greater than $4,484 and less than or equal to $5,739, the surtax is 20% of the basic provincial tax payable over $4,484. Let’s break it down: a person making $80,000 owes $5,112 in basic provincial taxes. The surtax will be calculated as 20% * ($5,112 - $4,484) = $125. The key thing here is that the 20% is only applied to the number between $4,484 and $5,112. The initial $4,484 won’t produce any surtax.
If your basic provincial tax payable is greater than $5,739, the surtax is 20% of the basic provincial tax payable over $4,484, plus 36% of the basic provincial tax payable over $5,739. For a final example, let’s consider the person making $95,000 annually. This person would owe $6,724 as Basic Provincial Tax. The surtax will be calculated as follows: 20%* ($6,724 - $4,484) + 36% * (6,724 - 5,739) =$802.
Total Provincial Tax = Basic Provincial Tax + Ontario Surtax
- A person with a $60,000 annual income will owe a Total Provincial Tax of $3,282 = $3,282 + $0.
- A person with an $80,000 annual income will owe a Total Provincial Tax of $5,237= 5,112 + $125.
- A person with a $95,000 annual income will owe a Total Provincial Tax of $7526= $6,724+ $802.
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