Understanding how much tax you owe in Ontario can be complex. With both federal and provincial components, income tax in Ontario varies depending on your income level, business structure, and deductions. Whether you’re a salaried employee, self-employed, or a business owner, staying informed about current tax rates and rules helps you stay compliant and financially prepared.
This guide breaks down Ontario’s tax system, including income tax brackets, sales tax rates, and key steps to ensure you’re filing your taxes accurately.
Understanding Ontario’s Income Tax Structure
In Canada, individuals pay both federal and provincial income taxes. These taxes are calculated progressively, meaning your income is taxed at different rates as it increases.
For 2025, the federal income tax rates are as follows. The first $55,867 of taxable income is taxed at 15%. The portion of income over $55,867 up to $111,733 is taxed at 20.5%. Income over $111,733 up to $173,205 is taxed at 26%. For income over $173,205 up to $246,752, the rate is 29%. Anything above $246,752 is taxed at 33%.
Ontario’s provincial income tax rates for 2025 begin at 5.05% for the first $51,446 of taxable income. Income over $51,446 up to $102,894 is taxed at 9.15%. The rate increases to 11.16% for income over $102,894 up to $150,000. Income between $150,000 and $220,000 is taxed at 12.16%, and amounts above $220,000 are taxed at 13.16%.
Your total income tax is the combined amount from both the federal and provincial portions based on your taxable income.
How Ontario’s Sales Tax Works
Ontario uses the Harmonized Sales Tax (HST), which combines the federal Goods and Services Tax (GST) and the provincial Retail Sales Tax (RST). As of 2025, the HST rate is 13%, which includes 5% federal and 8% provincial. This tax applies to most goods and services purchased in Ontario, including consumer products, dining, transportation, and professional services.
Additional Taxes and Considerations
Businesses in Ontario must pay both federal and provincial corporate income taxes. The general provincial corporate tax rate is 11.5%, and the federal corporate tax rate is 15%. Small businesses that meet certain criteria may be eligible for a reduced small business tax rate, which is currently around 12.2% combined.
If you’re self-employed, you are responsible for calculating and remitting your own income tax, Canada Pension Plan (CPP) contributions, and HST if your revenues exceed $30,000. This responsibility makes it crucial to maintain accurate records throughout the year. Many self-employed individuals seek support from a tax filing professional to ensure compliance and avoid penalties.
Employers operating in Ontario must also handle employee source deductions. This includes federal and provincial income tax withholdings, CPP contributions, and Employment Insurance (EI) premiums. Ensuring proper remittance schedules and accurate payroll records is essential for employers, which is why many businesses rely on professional payroll services in Canada.
Step-by-Step: How to Estimate Your Income Tax in Ontario
Start by calculating your total annual income. This includes wages, self-employment earnings, rental income, dividends, and any other sources of income.
Next, subtract any eligible deductions. These may include contributions to a Registered Retirement Savings Plan (RRSP), childcare expenses, moving expenses, or business-related costs for self-employed individuals. After deductions, apply any eligible tax credits such as the basic personal amount or tuition credits.
Using the federal and provincial tax rates, calculate the tax owed on each portion of your taxable income. Then subtract any tax you have already paid through payroll or installments. The result is the balance you owe or your refund amount.
If you operate a business or are self-employed, you must also account for quarterly tax installment payments and, where applicable, HST collection and remittance.
Get Professional Help for Accurate Tax Filing
Ontario’s tax system has multiple layers and rules, which can be especially confusing for business owners and self-employed individuals. That’s where Ihcpa.ca can help. We offer CPA services tailored to your unique situation. Whether you need help understanding your personal tax obligations, managing business filings, or reviewing your deductions, our team is equipped to support you with expert knowledge and care.
How much tax you pay in Ontario depends on your income level, source of earnings, and available deductions. Staying current on tax rates and using a strategic approach to tax planning ensures you remain compliant and financially prepared. If you want clarity and peace of mind, working with professionals like those at Ihcpa.ca is a smart decision.
Let our team of experienced tax professionals guide you through every stage of your tax journey, ensuring accuracy, efficiency, and confidence year after year.