Ontario Taxes for 2014

The pre-budget consultations for the 2014 Ontario budget closed on March 28 but the date of the budget has yet to be announced. However, recently leaked government documents indicate that the budget will be presented in the first week of May.

Previously Announced Changes

As with most provinces, the Ontario tax brackets and most provincial personal amounts are indexed annually. For 2014 the Ontario indexation factor is 1.010 (i.e. a 1.0% increase). For 2014 the basic personal amount, for example, increases to $9,670 – lower than many other provinces. Ontario makes up for the low basic personal amount by providing tax reductions to low-income individuals.

In response to the change in the gross-up for small business dividends announced in the 2013 federal budget, Ontario announced several changes to the taxation of dividend income in Ontario. The November 2013 Economic Outlook did not change the dividend tax credit rate for small business dividends (which is set as 4.5% of the gross up) but changed the surtax calculation so that the surtaxes are now calculated before the dividend tax credit. The result is a net decrease in taxes on small business dividends for taxpayers whose taxable income is below about $43,000. For taxpayers above this threshold, the provincial  marginal tax rate on such dividends increases by about 2%.

In the same Economic Outlook, the government also announced an increase in the dividend tax credit rate for eligible dividends from 6.4% of the taxable dividend to 10%. The result of this change is a reduction in the marginal tax rate for eligible dividends for taxpayers whose taxable income is below about $82,000. For taxpayers above this threshold, the marginal tax rate remains roughly the same as in 2013.