Budgeting | Income Tax | Investment Strategy

Financial Planning

Strategies and Concepts for Young and Married Couples Starting out in Life.

Personal Tax

• It is important to understand the basic income tax rates.

ONTARIO RATES SHOWN TO EXPLAIN CONCEPT OF PROGRESSIVE TAX RATES:

Income	Ordinary Income	Gross Capital Gain	Cash Dividend
Up to $31,667	22.05%	11.03%	4.59%
At $31,677	28.05%	14.03%	11.99%
At $31,894	31.15%	15.58%	15.86%
At $56,119	32.98%	16.49%	16.87%
At $63,355	36.98%	18.49%	21.87%
At $63,787	39.39%	19.70%	24.88%
At $66,085	43.41%	21.71%	27.60%
At $103,000	46.41%	23.21%	31.35%

Marginal Tax Rates

• This is the rate of tax which applies to the last dollars you earn in a year.
• It is a surprise to most people how heavily they are taxed on these dollars.
• Income deductions, such as contributions to a Registered Retirement Savings Plan, reduce your taxes at your marginal rate of tax, your highest tax bracket.

Before Tax Dollars and After Tax Dollars

• Paying with "before tax dollars" or with "after tax dollars", the cost difference is tremendous!
• Suppose you pay for something which costs $1,000 and you pay with after tax dollars.
• Your marginal tax bracket is 40%.
• You have to earn $1,666 of your gross income.
• This means the true cost to you is 66% greater than the price paid!