Residents of Ontario, including temporary residents and recent newcomers, must pay federal and provincial income tax on their earnings. Both taxes are calculated separately and the money is used to finance government programs and services. The rate of taxation is higher for people who earn more money. For example, a person earning under $40,000 a year is taxed at a lower rate than a person who earns more than $125,000 (see links in For More Information below for more detail on income tax percentages).
Most people have their income tax automatically deducted from their paycheque by their employer as part of their payroll deductions. Others may need to pay the government in installments. Both methods are only estimations of the final income tax owed for that year.
The government of Canada requires all adult residents to file an annual income tax return to the Canada Revenue Agency (CRA) by April 30. An income tax return is a statement of an individual's earnings and the amount of income tax that was deducted. Some people may have paid too much tax and will receive a refund; others may not have paid enough tax and must pay the amount owed to the CRA.
Some individuals may not have any income to report but may qualify for certain tax credits that will provide them with a refund. The income tax paid by an individual is based on their taxable income or the portion of their earnings which is taxable. Taxable income is the amount of money a person earns minus certain eligible deductions such as child-care expenses or retirement plan contributions.
Ontario residents pay a Harmonized Sales Tax (HST) of 13% on most goods and services they purchase. Some items, such as prescription drugs, municipal transit, and basic groceries, are exempt from the HST. For some goods and services, the HST is only 5% (see links in For More Information below for details on the HST and a listing of goods and services). The HST is added to the price of an item at the cash register.
People on low or moderate incomes may qualify for federal and provincial tax credits that will reduce their overall income tax or provide them with a regular cash refund from the government. There are two types of tax credits: non-refundable and refundable.
Non-refundable tax credits are used to reduce an individual's income tax but can't be used for a refund. An example of a non-refundable tax credit is:
- The Children's Fitness Tax Credit, which allows parents to claim up to $500 per year for certain fitness expenses for children under the age of 16.
Refundable tax credits provide individuals with regular cash refunds even if they pay no income tax. An example of a refundable tax credits is:
- The Goods and Services/Harmonized Sales Tax (HST/GST) credit, a tax-free payment given four times a year to individuals aged 19 or over and families living on low or modest incomes.
For More Information
An introduction to Canada’s tax system, what taxes are used for, tax credits, types of income tax, filing a tax return, municipal property taxes, and business taxes. Available in Arabic, Chinese (Simplified), French, Gujarati, Pilipino (Tagalog), Punjabi, Russian, Spanish, Tamil, and Urdu.
An explanation of the Goods and Services Tax (GST), Provincial Sales Tax (PST) and Harmonized Sales Tax (HST).
General and specific information about the Goods and Services Tax, Harmonized Sales Tax, rebates, and important dates for businesses.
A list of taxes and charges under the Ontario tax system, including personal income tax, harmonized sales tax and provincial sales tax.
Information about filing a tax return in Canada: who has to file a return, important dates, determining residency for tax purposes and what to do if you live outside of Canada.
The federal government income tax rates. Includes a chart that can be used to manually calculate the amount of income tax.
The Canada Child Tax Benefit helps families on low incomes with children under the age of 18. The amount of the credit is based on a family’s income, number and age of children and where the family lives. Available in Arabic, Chinese (Simplified), French, Gujarati, Pilipino (Tagalog), Punjabi, Russian, Spanish, Tamil, and Urdu.
Information about how to reduce the amount of income tax you pay using Ontario tax credits.
Who is eligible and how to apply for the GST/HST tax credit.
A guide to understanding Ontario tax credits, who can claim them, and the difference between refundable and non-refundable credits.
Links to federal and provincial programs and benefits for families with children. Includes Canada Child Tax Benefit, Child Disability Benefit, and a calculator to determine the entitled amount.
Information for individuals on the income tax rules that apply to newcomers to Canada (immigrants).
Information on international and non-resident taxes for individuals.
Information about a federal non-refundable tax credit for parents who enrol their children in physical activity programs.
Overview about working in Canada. Includes links to information on government, wages, taxes, important documents, challenges, and rights as well as videos and guides. Also features the Working in Canada Tool, which helps newcomers decide where to live and work by researching different occupations in different locations. Includes job opportunities currently available in Canada.
Information on saving and investing for the individual. Includes details on common types of investments, government saving and investing plans, setting saving and investing goals, costs and fees, working with a financial advisor or planner and protecting yourself from fraud. Also includes a set of tools and links to publications on Tax-free Saving Accounts (TFSAs) and saving for your child’s education with a Registered Education Saving Plan (RESP).
Information on filing income tax returns as a student: whether you need to file and what tax return benefits are available to those who do. Complied by Queen’s University International Centre (QUIC).
Multiple language brochures and other informational documents on the services provided by Service Canada. Includes information on employment insurance (EI), workers rights, job bank, social insurance number (SIN), child care benefit, child and family benefits, Canada pension plan, old age security, and others. Available in English, Arabic, Gujarati, Persian, Punjabi, Russian, Chinese, Spanish, Tagalog, Tamil, and Urdu.
Information about a federal non-refundable tax credit for parents who enrol their children in artistic, cultural, recreational, or developmental activity programs.
Information about a permanent refundable Ontario tax credit to assist with the cost of permanent home modifications that improve accessibility or help a senior be more functional or mobile at home. It can also be claimed by senior homeowners and tenants, and people who share a home with a senior relative.