On July 14, 2014, the Ontario Ministry of Finance announced an increase to the top tax brackets for Ontario individuals. The tax rate changes will affect Ontario high income earners for 2014 and subsequent tax years. No changes were announced to the Federal tax brackets. Here are the key changes of this new legislation:
The second highest tax bracket for Ontario individuals earning between $150,000 – $220,000 will increase to 47.97% (the 2013 rate was 46.41%). The highest tax bracket for Ontario individuals earning over $220,000 will increase to 49.53% (the 2013 rate was 46.41% for income over $505,000). See the table below the article with a rate comparisons of 2014 and 2013 tax rates for ordinary/regular income, capital gains, eligible and non-eligible dividends.
Additional tax planning strategies should be given to consider the impact new rate changes including: (1) contributing to an RRSP (2) setting up a corporation to defer income tax and (3) income splitting with family members.
MDTax would be happy to provide you with details on tax strategies to help reduce the impact of the new Ontario tax rate increase. Please get in contact with us at [email protected] for further details. Elliott Stone, CPA, CA, is the founder of MD Physician Tax Services in Toronto.
Tax Rates noted below reflect the Combined Ontario/Federal rate for Ontario individuals:
| 2014 | 2013 | |
|---|---|---|
| Interest and Regular Income | 46.41% (>$135,000) 47.97% (>$150,000) 49.53% (>$509,000) | 46.41% (>$135,000) – 49.53% (>$509,000) |
| Capital Gains | 23.20% (>$135,000) 23.98% (>$150,000) 24.77% (>$509,000) | 23.21% (>$135,000) – 24.77% (>$509,000) |
| Eligible Dividends | 29.52% (>$135,000) 31.67% (>$150,000) 33.82% (>$509,000) | 29.54% (>$135,000) – 33.85% (>$509,000) |
| Non-Eligible Dividends | 36.45% (>$135,000) 38.29% (>$150,000) 40.13% (>$509,000) | 32.57% (>$135,000) – 36.47% (>$509,000) |