3

The highest marginal federal tax rate in Canada is 33% and the highest marginal provincial tax rate in Ontario is 13.16% (source: Government of Canada tax rates webpage)

Adding these together, the highest marginal tax rate should be 46.16% in Ontario. However, I live in Ontario and am paying a 53.53% marginal tax rate. This is also listed as the highest combined marginal rate by multiple sources, even ones that repeat the 33% and 13.16% values (example). Why is it 53.53% and not 46.16%? Is there an established formula for calculating a marginal tax rate since it doesn't seem to just be federal rate + provincial rate?

1
  • 1
    How have you established you're paying 53.53% tax? If it's your salary have you established you're not paying for something such as pension contributions? Commented Mar 11, 2023 at 8:44

1 Answer 1

3

Ontario appears to operate a "surtax".

So you pay the headline Ontario income tax, plus an extra 56% of that tax above a certain level. This effectively means that those with high enough incomes, with a threshold depending on their own circumstances because allowances (the "personal amount") will vary, will be paying 13.16% * 1.56 = 20.53% Ontario tax. That's how you get to the marginal tax rate everyone quotes.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .