All That You Want To Know About Ontario Taxes

If you are someone who is filing their Ontario taxes for the first time or if you have multiple income sources, we understand that it can be an overwhelming process. There are lots of tax rules in Ontario like personal income tax, sales tax, and payroll deductions. Keeping a tab of all of these, along with other federal taxes for Ontario, becomes difficult. Follow this guide and we’ll explain Ontario (ONT) taxes in a simple and easy to understand way – what you owe, how is it calculated, and how to stay compliant?

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How Do Ontario Taxes Work?

Canada has a two-tier tax system – federal and provincial. If you live in Ontario and earn income in Ontario, then you need to pay Ontario provincial tax in addition to the federal tax. Both these taxes are collected by the Canada Revenue Agency (CRA) when you file your annual tax return.

Ontario taxes apply to –

• Individuals
• Self-employed professionals
• Corporations
• Employers
• Consumers (in the form of sales tax)

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Ontario Personal Income Tax Rates

Many people don’t know that Ontario uses a progressive tax system. It means that the more you earn, the higher the tax rate will be on your additional income.

Ontario tax rates increase across several brackets for individuals. Lower portions of the income are taxed at a lower rate, while the higher portions are taxed at a higher rate. These tax rates are separate from the federal tax rates. But keep in mind that both the provincial and federal tax rates are applied together on your annual tax return.

Some of the most common sources of taxable income in Ontario include –

• Employment income (salary as well as wages)
• Pension income
• Rental income
• Investment income
• Self-employment income
• Foreign income (with possible credits)

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Ontario Tax Credits And Deductions

An indispensable part of the Ontario taxes are the several non-refundable tax credits. These tax credits can help reduce the provincial tax payable.

Some of the most popular Ontario tax credits are –

• Basic Personal Amount – reduces the tax for all residents
• Ontario Trillium Benefit (OTB) – it combines energy, sales tax, and property tax credits
• Ontario Seniors’ Public Transit Tax Credit
• Caregiver and disability-related credits

These credits do reduce the amount of tax payable, but the deductions reduce your overall taxable income. For example, RRSP contributions and childcare expenses.

To know more about these Ontario tax credits, get in touch with a professional Ontario tax expert like Taxccount Canada. We have a team of highly qualified and experienced professionals who understand your requirements and provide customized solutions.

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Ontario Sales Tax

When in Ontario, you need to pay Harmonized Sales Tax (HST). It combines the following –

• 5% federal GST
• 8% Ontario provincial tax

This means, the total HST rate in Ontario is 13%.

HST applies to most goods and services in Ontario, including –

• Retail sales
• Restaurant meals
• Professional services
• Digital products

Some of the items are zero-rated or exempt, like basic groceries, prescription drugs, and certain medical services.

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Ontario Taxes For Self-Employed Professionals

For those who are self-employed in Ontario, the tax responsibilities vary compared to those of regular employees. The key Ontario tax obligations are –

• Report business income on your personal tax return
• Pay both Ontario and federal income tax
• Pay CPP contributions (both employee and employer portions)
• Register for HST if your annual revenue exceeds $30,000

Self-employed professionals can deduct business expenses like, office costs, internet, vehicle expenses, and professional fees from their tax return.

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Ontario Corporate Taxes

For businesses and corporations that are operating in Ontario, paying the Ontario Corporate Income Tax (CIT) in addition to the federal corporate tax is a must.

Ontario Corporate Tax Rates

Small businesses can benefit from a lower tax rate on their active business income.

General corporations pay a higher tax rate.

Corporations also need to file –

• Employer payroll taxes
• HST returns
• Instalment payments throughout the year

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Ontario Payroll Taxes

Corporations have an added duty of managing payroll deductions and employer contributions. Our team at Taxccount Canada can help you understand the nuances of Ontario Payroll Taxes better.

Here are some of the most common ones –

• CPP contributions
• Employment Insurance
• Employer Health Tax (EHT)

You may not know, but the employer Health Tax (EHT) is applicable when the total payroll exceeds a certain given threshold and it helps fund Ontario’s healthcare system.

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Important Deadlines For ONT Taxes

The CRA has set certain deadlines, and it is crucial for you to meet those in order to avoid any penalties or interest.

Key tax deadlines are –

• Personal tax return – April 30
• For self-employed individuals – June 15 (payment is still due on April 30)
• Corporate tax return – 6 months after the fiscal year-end
• HST filings – Can be monthly, quarterly, or annually depending on the total revenue

Make sure to avoid late filing as it may result in heavy penalties, interest charges, and even loss of benefits.

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Common Mistakes To Avoid

A lot of taxpayers tend to overpay by making small mistakes when calculating their taxes. The most common mistakes are –

• Forgetting to claim Ontario tax credits
• Not reporting foreign or any other side income
• Missing HST registration requirements
• Incorrect calculations for payroll
• Late filing or missing instalment payments

When you work with a tax professional, like Taxccount Canada, you can avoid these issues and stay compliant. Also, Ontario tax rules change frequently and staying up-to-date can be overwhelming. Trust the experts to back you and provide the best services.

Our team will help you stay compliant, file accurately and timely, and maximize your tax credits and deductions. So, whether you are an employee, self-employed professional, a business owner, or a corporation, get in touch with us for expert guidance on Ontario tax.

This is general information only and not professional advice. Consult a professional before acting.