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2014 Tax Changes to Ontario Employees who Earn More than $150,000

On July 24, 2014, the Ontario government passed into law increases to personal income tax rates for Ontario employees who earn more than $150,000 in 2014.  These changes come into effect September 1st, 2014. However, the CRA will allow employers to implement the new changes on a “best-effort where practical” basis, and is not going to penalize employers for failing to withhold the correct taxes. The CRA suggests employers discuss these changes with their affected employees and employees can ask their employer to increase their withholdings to address the possible shortfall.

Most employees earning over $150,000 will have a 3% or 6% increase in their Ontario taxes on regular pay from September to December, 2014.

The personal tax rate increases in the Ontario budget is 1% for earnings of $150,000 to $220,000 and 2% for $220,000 to $514,090. Because the tax increases are effective January 2014 but implemented for only the last 4 months of 2014, the new CRA tax tables will result in many of these employees having a 3% or 6% increase in their Ontario tax deduction on regular pay from September to December 2014.

Employees earning over $514,090 will also have a retroactive tax increase from September to December, 2014 since their earnings between $150,000 and $514,090 would have been taxed at the lower rates from January to August 2014.

The current government passed the tax rate changes in July and made them retroactivity to January 1, 2014 as they anticipate this will raise an additional $635 million in tax revenue.

 

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