: Deficit-Fighting High-Income Tax Bracket

Ontario has introduced a high-income tax bracket with a rate of 13.16 per cent on individual taxable income over $500,000 a year.

The Deficit-Fighting High-Income Tax Bracket is intended to apply as of July 1, 2012. Because tax rates are set on an annual basis, the top tax rate is 12.16 per cent for 2012 and 13.16 per cent for 2013 and subsequent years.

Once the budget is balanced in 2017-18, the government proposes to return the tax rate on income over $500,000 to 11.16 per cent.

Statutory Tax Rates (%)
Taxable income1 2011 2012 2013 2014 2015
$0 – approximately $39,000 5.05
Approximately $39,000 – $78,000 9.15
Approximately $78,000 – $500,000 11.16
Over $500,000 11.16 12.16 13.16
1 Tax thresholds are adjusted annually for inflation.

Ontario applies a surtax of 20 per cent on basic Ontario tax over $4,213 plus 36 per cent on tax over $5,392. This raises Ontario’s 11.16 per cent tax rate by 6.25 percentage points to 17.41 per cent.

The surtax applies to the tax rate for income over $500,000, raising the top effective tax rate by 3.12 percentage points when the rate is fully implemented in 2013. The tax credit rate for charitable donations over $200 is not changed.

Revenue Impact

All additional revenue from the Deficit-Fighting High-Income Tax Bracket will be used to reduce the deficit and accelerate Ontario’s five-year plan to balance the budget by 2017-18.

It is expected that about 23,000 people, or 0.2 per cent of Ontario tax filers, will pay an average of about $19,000 more in Ontario personal income tax. This will generate additional personal income tax revenue of about $280 million in 2012-13, increasing to $470 million in 2013-14.

The Canada Revenue Agency has posted revised payroll deductions formulas and online calculator to reflect this change starting July 1, 2012.

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