Disposable Income & Taxes In Ontario
Analyzing personal taxes, tax an average income earner in Ontario pays, leaves hardly any disposable income with assumptions based on normal expenditures a family incurs. There could possibly be a 5-10% swing in overall income and expense resulting in different picture but trend won’t change significantly
My calculations concluded that unless family income exceeded annual $75000 mark it wouldn’t leave enough cash in hand, forget saving, even to manage and pay monthly bills.
My friend Joe would always say " we pay so much taxes" but he couldn’t figure out how much taxes actually he paid. All he knew was there was hardly any savings in his bank account. He took pride in owning his home . I often asked him " His home"? Or Bank owned it?
He argued his home value grew on average 3% annually on his initial investment. He was only taking "initial " investment into consideration.
What about annual maintenance cost for home like utilities, tax on house and "adds- on" for example landscaping ,minor repairs .
Considering these maintenance, it would cost him additional at least 1.5-2 %, his net return on home investment would barely be 1%. Further discounting for inflation he was in negative growth.
If not smart enough to manage debts specially, credit card and consumer debts -Joe was deeper into problems.
If we review following tax tables and calculations, it would be clear that unless his individual or combined family gross income rose above $75000 he would continue to have deficit which invariably be financed ofcourse, easily by credit cards and line of credits.
At lowest level of $45000 annual income, one pays (as shown in following table) –Income taxes of $ 10,247, Employment insurance of $711 and indirect taxes of about $2,000 which totals to $12,959 - about 28% of earned income. These taxes don't include house tax, which is additional average of $3000 annually.
Compare net income after taxes with monthly expenses and one is left with ever-unsolved number crunching monthly budget.
Income Level $ 45,000 50,000 60,000 75,769
Federal Income tax
@15% on first $37,885 5,682 5,682 5,682 5,682
@22% on balance over
$37,885 but not over $75,769 1,565 2,665 4,865 8,334
Provincial(Ontario) Income tax
@6.05%on first $36,020
of taxable income 2,179 2,179 2,179 2,179
@9.15% on next $36,021 821 1,279 ,194 3,295
@11.16% on the amount over $72,041 416
Total Income tax $ 10,247 11,805 14,920 19,906
Employment Insurance 711 711 711 711
Taxes & EI $ 10,958 12,516 15,631 20,617
Average taxes & insurance rate 24% 25% 26% 27%
Net Income after taxes $ 34,042 37,484 44,369 55,152
Monthly Net Income 2,836 3,123 3,697 4,596
Less: GST /PST paid on average
monthly expenses 175 175 250 300
CPP contribution 180 250 300 315
Net Cash inflow 2,481 2,698 3,147 3,982
Monthly Expenses
(See the calculations below) 3,875 3,875 3,875 3,875
Surplus/(Deficit) (1,394) (1,177) (728 ) 107
Average Monthly Family Expenses GST/PST
Mortgage 1,500
Utilities like hydro, heating,
water,telephone
Internet, cable $ 500 $ 65
Home Insurance $ 75
Personal life insurance $100
Car Lease/instalment $ 400 $52
Car gasoline $ 200 $10
Car Insurance 150
(Presuming one car owned)
Personal Expenses $200 $26
Grocery $ 500 $ 25
Credit card loan Payments $250
TOTAL $ 3,875 $178
GST/PST annually works out to $ 2000 approximately or
Canada Pension Plan contributions add up another 5% of Taxable income
Analyzing personal taxes, tax an average income earner in Ontario pays, leaves hardly any disposable income with assumptions based on normal expenditures a family incurs. There could possibly be a 5-10% swing in overall income and expense resulting in different picture but trend won’t change significantly
My calculations concluded that unless family income exceeded annual $75000 mark it wouldn’t leave enough cash in hand, forget saving, even to manage and pay monthly bills.
My friend Joe would always say " we pay so much taxes" but he couldn’t figure out how much taxes actually he paid. All he knew was there was hardly any savings in his bank account. He took pride in owning his home . I often asked him " His home"? Or Bank owned it?
He argued his home value grew on average 3% annually on his initial investment. He was only taking "initial " investment into consideration.
What about annual maintenance cost for home like utilities, tax on house and "adds- on" for example landscaping ,minor repairs .
Considering these maintenance, it would cost him additional at least 1.5-2 %, his net return on home investment would barely be 1%. Further discounting for inflation he was in negative growth.
If not smart enough to manage debts specially, credit card and consumer debts -Joe was deeper into problems.
If we review following tax tables and calculations, it would be clear that unless his individual or combined family gross income rose above $75000 he would continue to have deficit which invariably be financed ofcourse, easily by credit cards and line of credits.
At lowest level of $45000 annual income, one pays (as shown in following table) –Income taxes of $ 10,247, Employment insurance of $711 and indirect taxes of about $2,000 which totals to $12,959 - about 28% of earned income. These taxes don't include house tax, which is additional average of $3000 annually.
Compare net income after taxes with monthly expenses and one is left with ever-unsolved number crunching monthly budget.
Income Level $ 45,000 50,000 60,000 75,769
Federal Income tax
@15% on first $37,885 5,682 5,682 5,682 5,682
@22% on balance over
$37,885 but not over $75,769 1,565 2,665 4,865 8,334
Provincial(Ontario) Income tax
@6.05%on first $36,020
of taxable income 2,179 2,179 2,179 2,179
@9.15% on next $36,021 821 1,279 ,194 3,295
@11.16% on the amount over $72,041 416
Total Income tax $ 10,247 11,805 14,920 19,906
Employment Insurance 711 711 711 711
Taxes & EI $ 10,958 12,516 15,631 20,617
Average taxes & insurance rate 24% 25% 26% 27%
Net Income after taxes $ 34,042 37,484 44,369 55,152
Monthly Net Income 2,836 3,123 3,697 4,596
Less: GST /PST paid on average
monthly expenses 175 175 250 300
CPP contribution 180 250 300 315
Net Cash inflow 2,481 2,698 3,147 3,982
Monthly Expenses
(See the calculations below) 3,875 3,875 3,875 3,875
Surplus/(Deficit) (1,394) (1,177) (728 ) 107
Average Monthly Family Expenses GST/PST
Mortgage 1,500
Utilities like hydro, heating,
water,telephone
Internet, cable $ 500 $ 65
Home Insurance $ 75
Personal life insurance $100
Car Lease/instalment $ 400 $52
Car gasoline $ 200 $10
Car Insurance 150
(Presuming one car owned)
Personal Expenses $200 $26
Grocery $ 500 $ 25
Credit card loan Payments $250
TOTAL $ 3,875 $178
GST/PST annually works out to $ 2000 approximately or
Canada Pension Plan contributions add up another 5% of Taxable income
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