Site Information

 Loading... Please wait...

How taxes work in Ontario


The Ontario Personal Tax system is progressive, meaning that if you make less than $13,000, you pay no taxes~but if you make over $220,000, your tax rate is approximately 53.5% Whaaaaattt?

As a sole proprietor, you pay taxes on the entire amount of profit you make.

Ontario Corporate Tax Rates behave differently. For up to $500,000 in income the tax rate is only 12.5%. Anything over $500,000 is taxed at 26.5%, still only half of the personal rate.

How does tax savings/deferrals work?

By incorporating, your fees/income are paid into the corporation and your deductions are claimed by the corporation. You can defer taxes by NOT withdrawing all amounts deposited in the same year.


Your income is $200,000 after deductions (cost of goods, etc.) and your living expenses for the year is $60,000. At the personal tax rate, you would be paying $96,380.00 in income taxes.

If you incorporate your business, your income is paid to the corporation and taxed at the Corporate rate of 12.5%. For this, your corporation would be taxed $25,000 (12.5 on $200,000). Then you pay yourself, from the corporation, a total of $60,000 for the year. The tax on this would be $17,790. The total of the two taxes is $42,790. This amounts to $53,590 that remains in your corporation!

These savings can now be used for a variety of things. Income splitting with your family or even yourself, paying yourself in years when your income may be less, pay remuneration to family. You can also create a pension plan within your corporation.