Tax Rates

The final stages of the tax reductions outlined in the 2002 Budget are proposed to be rescheduled to January 1, 2004, so that there will be no personal income tax reductions for 2003.

In 2002, Ontario taxpayers paid tax of 6.16% on the first $30,814 of taxable income, 9.22% on the next $30,814 and 11.16% on income in excess of $61,629.

On January 1, 2002, the bracket thresholds changed to $31,893 and $63,786. The lowest and middle Ontario tax rates were reduced to 6.05% and 9.15%, respectively. The top rate for income in excess of $63,786 remained unchanged.

The 2002 Ontario Budget had proposed to reduce the low and middle Ontario brackets to 5.65% and 8.85% respectively, effective January 1, 2003, again leaving the top Ontario rate unchanged. The 2002 Budget proposes to defer these reductions until January 1, 2004.

Ontario also applies a two-tier surtax, calculated as a percentage of Ontario tax in excess of specified amounts. The 2002 Budget had proposed to eliminate the first tier surtax altogether on January 1, 2003 by increasing the first tier threshold to the same level as the second tier. The 2002 Budget proposes to defer this proposal to January 1, 2004. The surtax will remain the same for 2002 and 2003, at 20% of Ontario tax in excess of $3,685 and 36% of Ontario Tax in excess of $4,648. These surtax tiers apply on taxable incomes in excess of $56,161 and $66,164 respectively.

The Ontario Tax Reduction eliminates or reduces Ontario personal income tax otherwise payable by individuals earning less than $13,008. The 2002 Budget proposes that the basic reduction be increased from $161 to $178 plus an increase for inflation, effective January 1, 2003.

Equity in Education Tax Credit

The 2002 Budget introduced a refundable tax credit for tuition fees paid to Ontario independent schools for kindergarten, elementary and secondary education. The credit for 2002 is 10% of annual tuition fees of up to $7,000 per child. The credit was to be increased at 10% a year until reaching 50% in 2006. The 2002 Budget proposes to delay the rate increase to 20% until 2004, and the final increase to 50% will be reached in 2007.