Tax rates: How much do you owe?

Tax Brackets and Rates

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Curious about the slice of your income that goes to taxes? Here's a fun fact: the more you earn, the more you're taxed, but only on the amount above each threshold. This 'graduated tax rate' means that each portion of your income is taxed differently, depending on how much you make. Dive into the world of federal and provincial tax brackets with us, and discover exactly what percentage of your hard-earned money is being taxed!

Federal Tax Rates for 2023:

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

Ontario Tax Rates for 2023:

• 5.05% on the first $49,231
• 9.15% on income over $49,231 to $98,463
• 11.16% on income over $98,463 to $150,000
• 12.16% on income over $150,000 to $220,000
• 13.16% on income over $220,000

These rates are subject to annual adjustments. For example, in 2024, the federal tax rates start at 15% for income up to $55,586, and go up to 33% for income over $246,752. Ontario's rates begin at 5.05% for income up to $51,446 and rise to 13.16% for income over $220,000.

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Combined Tax Rate

The combined federal and provincial tax rates can range from around 20% for the lowest bracket to approximately 53% for the highest. Additionally, individuals with taxable income over $20,000 must pay a Health Premium annually.

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Reducing Tax Liability: Deductions and Credits

To reduce tax payable, you can use deductions and tax credits. Deductions, subtracted directly from your income, include items like spousal support payments, RRSP contributions up to your limit, and moving expenses for work-related relocations over 40 kilometers. Tax credits, meanwhile, reduce the tax you owe. The basic personal tax credit is a common one, allowing a deduction based on a set government amount.

For 2023 and 2024, the federal basic personal amounts are set at $15,000 and $15,705, respectively, for lower tax brackets, and at $13,520 and $14,156, respectively, for higher brackets. Ontario's basic personal tax credit for 2023 is $11,865, increasing to $12,399 in 2024.

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Tax Payment Timing

Taxes are generally paid throughout the year via employer withholdings. If insufficient taxes are withheld, you'll owe more at filing time. Conversely, overpayment due to unclaimed deductions or credits often results in a refund.

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