The Income tax in Canada is composed of federal tax and the provincial tax. If you live in Ontario, your Income tax is the total of your federal tax and Ontario tax. These two taxes have different rates and brackets. Therefore, they need to be calculated separately and then added together to get the Income tax. This article will show you what these rates and brackets are for both taxes with a couple of example calculations.
Federal tax rates for 2011
15% on the first $41,544 of taxable income, +
22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088), +
26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800), +
29% of taxable income over $128,800.
Provincial/Territorial tax rates for 2011
Under the current tax on income method, tax for all provinces (except Quebec) and territories is calculated the same way as federal tax.
Form 428 is used to calculate this provincial or territorial tax. Provincial or territorial specific non-refundable tax credits are also calculated on Form 428.
Ontario
5.05% on the first $37,774 of taxable income, +
9.15% on the next $37,776, +
11.16% on the amount over $75,550
Example calculation
Lets say your taxable income is $40,000 for 2011. This is how you would calculate the taxes.
Federal tax:
15% on $40,000 = $6,000
Ontario tax:
5.05% ontario tax on $37,774 = $1,907.59 +
9.15% ontario tax on the remainder $2,226 = $203.68
Total Ontario tax = $1,970.59 + $203.68 = $2,111.27
Total income tax:
The total income tax = $6,000 + 2,111.27 = $8,111.27
Another Example
Lets say your taxable income is $130,000 for 2011. Here is the calculation.
Federal Tax
15% on the first $41,544 = $6,231.6 +
22% on the next $41,544 = $9,139.68 +
26% on the next $45,712 = $11,885.12 +
29% on the remainder $1,200 = $348
The total Federal tax = $6,231.6+$9,139.68+$11,885.12+$348=$27,604.40
Ontario Tax
5.05% on the first $37,774 = $1,907.59 +
9.15% on the next $37,776 = $3,456.50 +
11.16% on the remainder = $6,076.62
Total Ontario tax is $1,907.59+$3,456.50+$6,076.62=$11,440.62
The total income tax:
The total income tax = $27,604.40+11,440.62 = $39,045.02
