How does Ontario's personal income tax rate work on top of federal tax?

Ontario residents pay both federal and provincial income tax on the same T1 return. Federal tax applies to all Canadians at the same graduated brackets. Ontario then adds its own graduated provincial tax, calculated on your taxable income after certain provincial deductions and credits.

Ontario's provincial tax has several brackets, with higher rates applying to higher income levels. On top of the basic provincial tax, Ontario also charges a surtax on higher provincial tax amounts, which effectively adds an additional layer of tax for higher earners. This means the combined federal-plus-Ontario marginal rate at the top bracket is among the highest in Canada.

Ontario also has a number of non-refundable tax credits that reduce your provincial tax payable, such as the basic personal amount credit and the Ontario energy and property tax credit (part of the Trillium Benefit). Because both layers of tax interact, your effective tax rate depends on your total income, deductions, and applicable credits. A tax professional can model your specific situation accurately.