Ontario Income Tax Calculator 2022 & 2023.

Ontario Income Tax Brackets

Ontario income tax rates will be staying the same in 2021. What is changing is the level of income in the first two tax brackets.

Ontario increases their provincial income thresholds and the basic personal amount through changes in the consumer price index (CPI). This is called the indexing factor. Ontario's indexing factor for 2021 is 0.9%.

The amount of taxable income that applies to the first tax bracket at 5.05% is increasing from $44,740 to $45,142. The second tax bracket at 9.15% is increasing to an upper range of $90,287 from the previous $89,482.

The Ontario Basic Personal Amount was $10,783 in 2020. For 2021, the basic personal amount is increasing to $10,880. If you make less than $10,880, then you are exempt from Ontario’s provincial income tax. You may still need to pay EI premiums and CPP contributions.

Anticipated 2022 Changes

As mentioned previously, the tax brackets rise every year to match inflation as demonstrated by the consumer price index (CPI). Although not formally announced, in 2022, the federal tax brackets are expected to rise by an index factor of 1.025. This means the Federal Basic Personal Amount will increase to $14,398 ($13,808*1.025) in 2022. There have been no announcements about the 2022 provincial income tax, surtax, and health premium. Additional notable changes for the 2022 tax year include;

Introduction of the Ontario Staycation Tax Credit

Ontario residents can receive a 20% tax credit for local accommodation expenses. Eligible expenses include leisure trips at a location such as a hotel, bed-and-breakfast, or resort in Ontario. There is a maximum credit of $200 for an individual or $400 for a family.

Extension of the Ontario Seniors’ Home Safety Tax Credit

Senior homeowners/ renters or people living with senior relatives can receive a 25% tax credit on expenses meant to improve safety or accessibility. The tax credit can be a maximum of $2,500. Eligible expenses include, but are not limited to;

• Non-slip flooring
• Grab bars around a toilet or shower
• Wheelchair ramps, lifts, and elevators

Extension of the Ontario Jobs Training Tax Credit

Ontario residents between 26 and 65 can receive a maximum tax credit of $2000 on educational expenses. Eligible expenses include tuition paid to certain educational institutions or fees paid to occupational, trade, or professional bodies. The tax credit is 50% of the costs spent on eligible purchases.

The History of Ontario Provincial Income Taxes

1985-1995 (Increasing Taxes)

Following the 1982 recession, provincial governments across Canada found themselves with ballooning debt. As a result, Ontario needed to increase taxes to pay off the debt aggressively. In this period, provincial income tax increased from 48% of the basic federal rate to 58% by 1995. Ontario also created an additional surtax for high-income earners.

1996-2001 (Decreasing Taxes)

By 1996, Ontario had managed to pay off a significant portion of its debt due to the previous period’s operating surplus. As a result, Ontario tax policy made a dramatic change. In 1996, a 30% reduction in personal income tax was announced, with an additional 20% reduction in 1999.

2002-2017 (New Taxes, Recession)

By the mid-2000s, Premier Dalton McGuinty (Liberal) was elected and rolled back a series of income tax cuts. Provincial funding increased for healthcare amidst the SARS pandemic, and so a new controversial tax was implemented, known as the Ontario Health Premium. McGuinty’s second term focused on easing the economic damage caused by the 2008 recession. This saw the lowest income tax rate cut by one percentage point. Kathleen Wynne (Liberal) was elected after McGuinty and increased taxes for high-income earners.

2018-Present (Anticipated Tax Cuts)

Premier Doug Ford (Conservative) was elected in 2018. His campaign included promises for income tax cuts across low, middle, and high-income earners. However, only the Low-Income Individuals and Families Tax credit (LIFT) has been implemented. It is expected that the 2022 Ontario budget will bring tax cuts to the remaining brackets.

Ontario Provincial Income Tax Changes 2021