The Canadian government, along with provincial administrations including Ontario, use a tax bracket system for levying personal income taxes. Reviewing the current and upcoming brackets at both federal and provincial levels enables Ontarians to evaluate potential changes to their tax burdens. This article will break down these changes in detail, empowering taxpayers to maximize their savings and ensure full legal compliance.
2024 & 2025 Ontario Tax Rates & Tax Brackets
The federal tax bracket and Ontario tax bracket for the year 2025 are as follows:
| 2025 Ontario Tax Rate | 2025 Ontario Tax Bracket | 2025 Federal Tax Rate | 2025 Federal Tax Bracket |
|---|---|---|---|
| 5.05% | $52,886 or less | 15% | $57,375 or less |
| 9.15% | $52,887 to $105,775 | 20.5% | $57,376 to $114,750 |
| 11.16% | $105,776 to $150,000 | 26% | $114,751 to $177,882 |
| 12.16% | $150,001 to $220,000 | 29% | $177,883 to $253,414 |
| 13.16% | $220,001 and over | 33% | $253,415 and over |
2024 Ontario and Federal tax bracket:
| 2024 Ontario Tax Rate | 2024 Ontario Tax Bracket | 2024 Federal Tax Rate | 2024 Federal Tax Bracket |
|---|---|---|---|
| 5.05% | $51,446 or less | 15% | $55,867 or less |
| 9.15% | $51,447 to $102,894 | 20.5% | $55,868 to $111,733 |
| 11.16% | $102,895 to $150,000 | 26% | $111,734 to $173,205 |
| 12.16% | $150,001 to $220,000 | 29% | $173,206 to $246,752 |
| 13.16% | $220,001 and over | 33% | $246,753 and over |
2024-2025 Ontario Basic Personal Amount (BPA) Credit
The basic personal amount (BPA) reduces taxable income for all taxpayers. For 2025, Ontario has indexed its BPA by the 2.8% inflation factor to $12,747. Federal BPAs now range from $14,538 to $16,129 based on specific indexed formulas. These exempt basic amounts effectively function as zero-percent tax brackets. By reducing taxable income, the BPAs lower overall taxes owed at an individual’s marginal tax rates.
| Ontario Basic Personal Amount | Tax Rate | Federal Basic Personal Amount | Tax Rate |
|---|---|---|---|
| $12,747 (2025) $12,399 (2024) | 5.05% | $16,129 (2025) $15,705 (2024) | 14.5% |
Ontario Surtaxes
Higher-income residents face additional surtaxes on Ontario income taxes owed:
- 20% Surtax: Added to all provincial taxes exceeding $5,710 (approximate taxable income $93,132)
- Additional 36% Surtax: Boosts the 20% surtax to 56% on Ontario tax over $7,307 (approximate taxable income $109,727)
With the regular top rate at 13.16%, adding the 56% surtax increases the maximum rate to 20.53% on income over $220,000. This applies the top rate more progressively.
Ontario Marginal Tax Rates
The table below shows the combined federal and provincial marginal rates, including all surtaxes and BPA Tax credit. Ontario taxpayers can face total marginal rates ranging from 5.05% to 53.53%, depending on their tax bracket.
| Taxable Income ($) | 2025 Ontario Income Tax Rate | 2025 Ontario Capital Gains Tax |
|---|---|---|
| $12,747 or less | 0.00% | 0.00% |
| $12,747 to $16,129 | 5.05% | 2.53% |
| $16,130 to $52,886 | 20.05% | 10.03% |
| $52,887 to $57,375 | 24.15% | 12.08% |
| $57,376 to $93,132 | 29.65% | 14.83% |
| $93,133 to $105,775 | 31.48% | 15.74% |
| $105,776 to $109,727 | 33.89% | 16.95% |
| $109,728 to $114,750 | 37.91% | 18.95% |
| $114,751 to $150,000 | 43.41% | 21.70% |
| $150,001 to $177,882 | 44.97% | 22.48% |
| $177,883 to $220,000 | 48.28% | 24.14% |
| $220,001 to $253,414 | 49.84% | 24.92% |
| $253,415 and over | 53.53% | 26.76% |
How Do Ontario Tax Brackets Work?
Canada uses a progressive marginal tax rate system based on tax brackets. As taxable income increases, it surpasses income thresholds that place it into higher tax brackets with correspondingly higher rates. Taxpayers only pay the higher marginal rate on the portion of income that exceeds the prior bracket. Lower rates still apply to the income slices that fall into the lower brackets. This contrasts with a flat tax system charging the same rate regardless of income level.
For instance, an Ontario taxpayer with $130,000 of taxable income falls into the third tax bracket. They would pay:
- 5.05% on the first $52,886
- 9.15% on the next $52,889 ($105,775 minus $52,886)
- 11.16% on the final $24,225 ($130,000 minus $105,775)
Their average tax rate would equal their total tax bill divided by their total income. But marginal tax rates determine the tax applied to the next dollar earned.
How Do You Calculate Your Ontario Net Income?
Determining net income for Ontario tax purposes involves six key steps:
- Calculate Total Employment Income: Add up all sources of salaries, wages, commissions, benefits, taxable allowances, and other taxable compensation.
- Deduct Pre-Tax Contributions: Subtract any pre-tax payroll deductions towards pension plans, RRSP contributions, union dues, etc.
- Determine Taxable Income: From total employment earnings, subtract any other tax-deductible expenses like childcare costs, moving expenses, etc.
- Apply Tax Rates: Referring to federal and provincial tax tables, calculate taxes owed based on progressive marginal tax brackets.
- Subtract Tax Credits: Credits, such as the basic personal amount, directly reduce the taxes payable.
- Account for Garnishments: Potentially add back any court-ordered garnishments assessed on income.
The final net income represents take-home pay after accounting for payroll tax deductions and any other tax-deductible expenses or credits. Compare net income to gross income to determine total taxes owed.
Calculate income tax in other provinces in Canada:
What Are Ontario’s Popular Tax Credits and Deductions?
The notable Ontario tax credits that directly reduce provincial taxes payable include:
| Ontario Tax Credit/Deduction | Overview |
|---|---|
| Ontario Trillium Benefit | Provides monthly payments to low-income residents to alleviate sales taxes and property taxes |
| ON Childcare Access and Relief from Expenses (CARE) Tax Credit | Refundable tax credit covering up to 75% of eligible childcare expenses |
| ON Seniors’ Home Safety Tax Credit | 25% tax credit on certain home accessibility and safety expenses for qualifying seniors |
| ON Low-Income Workers’ Tax Credit | Tax reduction aimed at low-income workers and families |
In addition to provincial credits, the common federal tax credits and deductions include:
| Federal Tax Credit/Deduction | Overview |
|---|---|
| Basic Personal Amount | Non-refundable credit that reduces taxable income |
| CPP/EI Contributions | Premiums paid for the Canada Pension Plan (CPP) and Employment Insurance (EI) |
| Tuition Amount | Credit for tuition fees paid for post-secondary education |
| Medical Expenses | Tax credit for significant out-of-pocket medical and dental costs |
Tax Planning Tips for Ontario Residents
Proactive tax planning allows Ontario taxpayers to maximize after-tax income and retain more wealth over time. Key year-round strategies include:
- Income Splitting: Shift income towards lower-earning spouses or adult children using prescribed techniques.
- Tax-Efficient Investing: Employ accounts like Tax-Free Savings Accounts to earn tax-free investment income.
- Charitable Donations: Donate securities or other assets directly to registered charities instead of cash.
- RRSP Contributions: Top up Registered Retirement Savings Plans by early March annually and deduct on the prior year’s return.
- Year-end Tax Planning: Identify opportunities to defer tax or accelerate deductions before December 31st.
Planning personal and business taxes effectively requires understanding the latest developments. Work with qualified financial advisors to customize tax minimization strategies while ensuring full legal compliance. With the proper preparation, Ontario businesses and residents can thrive while optimizing their after-tax income.
FAQs on Ontario Tax Rates
How do Ontario tax brackets compare to other provinces?
Ontario's maximum marginal rate is similar to Alberta and BC, lower than Quebec but higher than Saskatchewan or Manitoba when considering top provincial tax brackets.
Are US investment dividends taxable in Ontario?
Yes, US dividends face a foreign withholding tax deducted by the US entity plus Ontario resident investors must still declare the income. Tax credits apply to avoid double taxation.
Do seniors qualify for Ontario tax relief programs?
Yes, low-income seniors and older adults can access provincial credits and grants like GAINS, OASP, Trillium Benefits, Home Safety Tax Credit and more.
Do Ontario residence taxes expire?
No, unpaid property taxes accrue interest until paid. After 3 years, the municipality can initiate the home seizure process, forcing a sale to collect tax arrears.
