See how much tax you will be paying at the provincial level on your 2024 income. Below, we guide you on how to calculate Ontario tax step by step, which is also the same way you calculate your federal tax owing.
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How to Calculate Ontario Tax [Preview]
The Canada Revenue Agency (CRA) administers taxes at both the federal and provincial levels, except for Quebec, where residents file separate income tax returns. Non-business entities use the Income Tax and Benefit Return or the T1 tax form.
If you live in Ontario, you file one income tax return, calculating federal income tax in the main form and provincial tax in another. Your Form ON428 is where you calculate your Ontario tax and credits. Check the complete income tax package for your 2024 tax liability.
Your T1 tax form has to be filled in parts, starting with your identification and other personal information. The subsequent steps will lead you to identify your tax owing and/or tax rebate.
Federal and Ontario income taxes are calculated separately but using the same process:
- Step 1: Adding up all sources of incomes to arrive at the gross or ‘Total Income’
- Step 2: Applying deductions to the total income to arrive at ‘Net Income’
- Step 3: Applying the tax brackets on the taxable income to arrive at ‘Gross Tax’
- Step 4: Applying the non-refundable tax credits to the gross tax to arrive at the ‘Net Tax’
- Step 5: Determining the income tax withheld in payroll or income tax slips (T4)
- Step 6: Applying the refundable tax credits to arrive at the tax owing or refund
Report All Your Sources of Income
Step 2 in your T1 tax form is about ‘Total Income’, where you report all your revenue. There are many sources of income, but the majority of Canadians earn from the following:
- Employment income (salary)
- Self-employment income
- Rental income
- Old age security (OAS) pension
- Etc.
Adding all your earnings arrives at your gross income, found in your tax return’s Line 15000. Learn how to calculate your total income with our Line 15000 guide.
Know the Major Types of Deductions
Step 3 is about ‘Net Income.’ You get this amount by applying the deductions in the gross income. Aside from your Basic Amount, here are the major types of deductions available throughout Canada:
- Registered Retirement Savings Plan (RRSPs)
- Registered Pension Plan (RPP)
- Canada Pension Plan (CPP)
- Employment Insurance premium (EI)
- First Home Savings Account (FHSA)
- Annual Union, Professional, or like Dues
- Child Care Expenses
Provinces and territories offer specific deductions. Check the complete list of credits and benefits in Ontario here.
Apply the Income Tax Brackets
After calculating your total income and applying the deductions (e.g., RRSP or childcare expenses), you get the ‘net income.’ This net income will be applied to the Ontario tax brackets to arrive at the ‘gross tax.’ Ontario tax rates in 2024 are at:
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For additional information, here’s what you will be paying at the federal level:
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The above rates are adjusted per inflation due to the Federal Budget. For further information and a better understanding of Canada’s progressive taxation system or how marginal tax rate works, visit Canada Tax Brackets 2024.
What’s Next? After applying the tax brackets, you use non-refundable credits to get the ‘net tax.’ See more information below.
Non-Refundable vs Refundable Credits
Know first that there are two types of credits: refundable and non-refundable. Here’s a quick comparison:
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You need to qualify for the credits that you claim for. A common refundable credit most Canadian taxpayers qualify for even if they owe no tax is the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit.
Income Tax Calculation Example
Here’s an example how to calculate Ontario tax, assuming your income and deductions:
- Gross Income: $150,000
- Deductions (RRSP): $30,000
- Net Taxable Income: $20,000
- Gross Tax Payable: $25,000
- Non-Refundable Tax Credits: $5,000
- Net Tax Payable (Federal and Provincial): $20,000
- Tax Withheld on T4: $18,0000
- Refundable Tax Credits (CWB): $1,000
This arrives at your tax owing or (refund) at $1000.
Key Tax Deadlines to Remember
File your returns promptly to avoid penalties from CRA. Keep these dates in mind:
- February 24, 2025: The earliest you can use the CRA’s NETFILE service to file your returns.
- April 30, 2025: Deadline for filing personal income taxes and paying taxes (if you are not also self-employed).
- June 16, 2025: Deadline for filing returns if you are also self-employed.
Late payment may especially get you penalized at 5% of your tax owing and an additional 1% for every month that you fail to pay on time.
Other FAQs About Ontario Tax
Yes, except for Quebec which has its own pension plan called Quebec pension plan.
The new capital gains threshold from June 25, 2024, is $250,000. Within this amount, 50% of your capital gains amount is taxable. If your capital gains exceed $250,000, the taxable portion of the exceeding amount will be 66.67%.
Ontario’s Basic Amount is $12,399, which you can claim for. Do not forget to review all the credits and deductions that may be available to you to lower your tax liability.
While you cannot avoid paying tax altogether, you can at least reduce your taxable income to reduce your tax owing. Check our How to Reduce Tax in Canada for a full guide.
While Ontario is the most populated province/territory in Canada, it is not the highest taxed. Quebec, the second most populated, ranks the highest in income taxes.
Get Tax Support at Legend Fusions
The CRA is opening its NETFILE services. If you are not sure how to calculate Ontario tax return and file, you can always ask the experts. Legend Fusions is here to streamline your tax return preparation, from calculating your tax owing or refund to making sure you are filing accurately. Our tax preparation expert is ready to help anytime! Let’s talk!
Jeffrey Ross
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws.