![]() Here are a few tax planning strategies that can take you from your current bracket to a significantly lower tax bracket: Tax planning strategies can help you avoid paying tax in the higher income tax brackets and resulting in potential tax savings. After your tax is calculated you deduct from your calculated taxes owing any tax credits to calculate your personal income tax payable. You will pay 53.53% tax on the income earned over $220,001, with a lower percentage of tax paid on income below $220,000 at the applicable tax bracket. But you won’t pay 53.53% tax on all of the income earned. For example, if your taxable income in Ontario is $450,000, that puts you in the top tax bracket of 53.53%. The taxable income is used to arrive at “Federal and Provincial Tax on Taxable Income” based on your taxable income, depending on which tax brackets your income falls into. Provincial tax rates, tax brackets, and credits vary by province and are calculated using the taxable income calculated under federal income tax rules on schedules accompanying the T1 Individual tax return. Therefore, a physician working in multiple provinces or territories will be required to allocate their professional earnings between the various provinces or territories. In addition to federal income tax, provincial taxes are imposed by the province or territory in which you reside or carry on business or professional activities. Those with lesser incomes pay a lesser percentage of taxes on the income earned in lower tax brackets, while those earning higher incomes pay a higher percentage of taxes on the income earned in higher tax brackets. Tax brackets determine the rate of tax paid for each additional dollar of income within the defined bracket/threshold. ![]() Canada uses a progressive (graduated) income tax system where your earnings are taxed at higher rates (tax brackets) as your income increases. Canada’s income tax system levies federal and provincial taxes on individuals.
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