Ok so it's a pretty dull topic for a Monday, but I am trying to get my head around the Canadian tax system & how it will apply to me (Ontario). Can someone have a look at the tax calculator below & tell me if it is roughly accurate/realistic?

http://www.ey.com/GLOBAL/content.nsf...8_Personal_Tax

When I type in hypothetical figures, it looks like the tax isn't very much? Maybe I'm doing it wrong - are you deducted the average tax rate or the marginal tax rate?

I am also looking at this document from the same site - http://www.ey.com/Global/assets.nsf/Canada/2008TaxRateCard_Ontario/$file/Ontario.pdf

Is the 'basic tax' section kind of like the UK 'personal allowance'? And what is the 'rate on excess', is this the rate of tax you pay? I hope not!

Sorry for all the questions, I have tried to work it out myself over the weekend but the vodka wasn't helping I think I need some input from those in the know!
Many Thanks

No, that one sucks for working out your take home pay as it doesnt seem to factor in your tax allowances and especially the effect of EI and CPP contributions. However, even with EI and CPP added in, tax is generally less here than the UK, unless you earn a large salary (in which case thats just too bad eh!) In the real world, on about 70k I pay less than 20% overall, but thats the married allowance as my wife doesnt work, plus a few common income deductions too.


http://www.taxtips.ca/calculator/cdncalculator.htm is a lot better.


OR you can go to the CRA website and look for the "tables on diskette"


Marginal tax rate is the rate at which any new income you get above that income level will be taxed at...ie if you get overtime or a bonus, thats how much you will lose as tax. In that case you dont have to worry about the effect of EI or CPP, as they are probably maxed out already (a significant difference to the UK, where there is no maximum level of NI contributions as far as Im aware)

The average tax rate is just what it says:

total tax payable / total earnings * 100.

The marginal tax rate is the percentage of tax you paid on the last dollar you earned.

I think what they are trying to say is that what they call "basic tax" is the amount of tax you will pay if you earn at the lower limit of each range they give, and the "rate on excess" is the percentage rate you will pay on each additional dollar you earn to the upper limit of that range.

Riiiiight, gotcha. That makes more sense now.

Thanks to iaink for the calculator, that one is much easier to work out. It certainly looks like my tax would be lower in Canada, which is nice!
I am still mightily confused with the various tax allowances etc, although I assume a single person who does not breed or become legally tied to someone else has no real need to know too much.

Thanks again!

What would be considered a large salary?

The main thing you would need to know about under those circumstances would be "RRSP"s if you intend staying here long term. RRSPs are the crux of (non government) pension provision, and money you save into RRSP funds is not taxable, but you have to claim it to get the refund... Thats where the marginal rates come in...your tax refund on say $5k saved into an RRSP would be basically the marginal tax rate on your income level, ...which could mean thousands in refunds.

Well, the top rate of 46% kicks in at about $120k...

You will get the basic tax credit so the first $9,600 you earn is effectively free of Federal income tax. I think the first $8,553 is effectively free of Ontario income tax. There is an additional Federal tax credit on your next $1,000 of income if it is earned income. Otherwise, that is about it. It will all be deducted by your employer and any adjustments made when you file your tax return each year.

There are two tax credits that you should know about:

1 The tuition amount and school fees. There is a generous tax credit if you undertake a course of further education at an approved establishment.

2 There is a tax credit for any medical expenses you incur that are not reimbursed by provincial or private insurance. There is a lower limit, but keep all you medical receipts until tax time.

Edit: if you are moving here long-term then iaink is quite right that you should seriously consider investing in RRSPs. However, you can't really do this until after you file your first tax return.

The medical expense amount is in effect really hard to claim, unless you dont have a benefit plan. I seem to recall you need to be exceeding 3% of your total income on eligible medical expenses before you can even think about claiming any money back.

Ah, damn, that's me screwed then.....

Only joking

Eh?

Link, please.

pdf link in the first post...

In ontario its 123k and change...
http://www.ey.com/Global/assets.nsf/...le/Ontario.pdf

links to other provinces here...
http://www.ey.com/global/content.nsf...ors_-_Overview

Shit. No wonder my installments are so large.

Yea, I think I'm safe from paying the top rate. Very very safe.

Thanks to you all for your kind help, it's all a bit clearer now!