Have you wondered, how much do Canadians pay in taxes? Here’s quick summary of how to figure out how our tax system affects you.

When you count on every penny from your paycheque to make ends meet, it almost hurts to see what is left over after taxes are taken out. As Canadians (and Ontarians) we can agree that our tax dollars contribute to the quality of life we enjoy, but wouldn’t it be nice to know the specific amount coming out of your pay?

The tax bracket (marginal tax rate) you are in does not mean you will pay a flat rate amount across the board. Your income may span a number of tax levels and you are taxed a different percentage on each level. You 2017 tax bracket is determined as follows:

• 15% on the first $45,916 of taxable income,
• 20.5% on the next $45,915 of taxable income (on the portion of taxable income over $45,916 up to $91,831),
• 26% on the next $50,522 of taxable income (on the portion of taxable income over $91,831 up to $142,353),
• 29% on the next $60,447 of taxable income (on the portion of taxable income over $142,353 up to $202,800),
• 33% of taxable income over $202,800.

Anyone with a desire to do complex math calculations can determine their exact tax bracket, but using your “effective tax rate” is a quick method for figuring what you can expect to pay.

But wait, there’s more…

Consider the Other Taxes

You pay more than federal taxes alone. You may also pay:

• Provincial income tax (in Ontario):
  • 05% on the first $42,960 of taxable income,
  • 15% on the next $42,963,
  • 16% on the next $64,077,
  • 16% on the next $70,000,
  • 16 % on the amount over $220,000
• GST (5% in Ontario)
• PST (8% in Ontario)

Calculating Your Effective Tax Rate

Your effective tax rate identifies how much you are taxed, on average, on your total income. Basically, you divide your taxes paid by your income to get a percentage.

For example, say your income is $30,000 a year and after all of your tax benefit deductions you pay $3,000 in federal taxes. Your effective tax rate is 10%.

$3,000 / $30,000 x 100 = 10%

Why is Knowing Your Taxation Rate Important?

As we mentioned earlier every penny matters, especially when your income vs. expenses forces you to live paycheque to paycheque. Knowing what you will be taxed helps you plan ahead to cover your bills.

If you do find yourself with a temporary cash crisis, we have timely, manageable solutions. Contact us to learn more.

[cta id=’15317′]