The Ontario surtax is extra complicated, so the calculation takes a number of extra steps, which you’ll see within the desk under.
|Provincial Tax Owed||Surtax Charges|
|As much as $4,991||0%|
|$4,991 to $6,387||20%|
|Over $6,387||56% (36% + 20%)|
To your 2022 revenue, in case your base provincial tax is as much as $4,991, you don’t pay a surtax. In case your base provincial tax is between $4,991 and $6,387, you pay 20% on the portion of provincial tax owed that surpasses $4,991. Lastly, in case your base provincial tax exceeds $6,387, you pay 20% on the portion of provincial tax owed over $4,991, plus 36% on the portion over $6,387. However excellent news: Most private tax packages routinely determine this out.
Past tax brackets, what else do you’ll want to know to arrange for tax season in 2022?
Now that you just perceive why it’s useful to know which federal and provincial tax brackets apply to your annual revenue, you’ll be capable to anticipate whether or not you’ll owe taxes in April or you’ll obtain a tax refund. And for those who owe cash, it’s higher to seek out out sooner than later. That manner it can save you up the cash forward of the Might 2, 2023, tax fee deadline and keep away from having to pay curiosity and penalties on overdue taxes. (Usually, the fee deadline is April 30, however in 2023 that falls on a Sunday.)
You may also wish to think about a extra proactive technique: Making month-to-month contributions to your RRSP all year long. Investing in an RRSP allows you to deduct your contribution quantities out of your taxable revenue. Lowering your taxable revenue often means a smaller tax invoice or a bigger tax refund. By paying into your plan month-to-month, you may maximize the advantages of your RRSP and tax-deferred funding progress.
And talking of maximizing, you’ll get the most important tax deduction by contributing probably the most you’re allowed in a yr—it’s referred to as “maxing out” your RRSP. That is very true for those who’re in a better tax bracket. The contribution restrict for an RRSP is often the lesser of 18% of your earned revenue or the annual RRSP restrict ($29,210 for 2022). (Discover out how much you should have in your RRSP, whether or not an RRSP or TFSA* makes extra sense for you, and what investments to consider*.)
Reasonably than scrambling to give you a lump sum earlier than the RRSP contribution deadline—which is March 1, 2023—you possibly can arrange computerized weekly or month-to-month transfers out of your checking account to your RRSP. It’s referred to as a pre-authorized contribution—and it’s like a present to your future self.
Plus, you’ll be capable to reap the benefits of dollar-cost averaging: Whenever you make investments on an everyday schedule, you buy extra shares when costs dip and fewer shares when costs are excessive, which reduces danger and lowers your common value per share.
To calculate how a lot tax you’ll save by making RRSP contributions, work out the relevant tax charge as defined above. Then, multiply your whole contribution by that tax charge. This offers you the approximate tax discount or potential tax refund.