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.

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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.

For example:

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**

**= $3281.467585**

**= $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) |

$60,000 | $3,282 |

$80,000 | $5,112 |

$95,000 | $6,724 |

**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

For instance:

- 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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**Google Plus (G+)**button at the beginning of this post. Also, if you have any questions, corrections or suggestions, then feel free to drop me a line in the comments section just below.
Thanks

ReplyDeleteYou are welcome.

DeleteThanks for the article. Just to clarify, the example seems to calculate the surtax above $5739 by double taxing the top tier. By doing: 20% * ($6,724 - $4,484) + 36% * (6,724 - 5,739) =$802, you are taxing 20% on the $4484 to $5739 and 20%+36% on the $5739+ tier. Is this correct? Or should it be: 20% * ($5,739 - $4,484) + 36% * (6,724 - 5,739) = $605.60

ReplyDeleteThank you!

The author did it right. That's how surtax works. Breaking down the daunting 56% rate into two pieces to make it less hideous

DeleteThis is the best explanation of the Ontario surtax. Thanks for the clarity.

ReplyDeleteNo problem. Glad it helped.

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