Fema Employment
Canadian Business Tax - percentage?
Last year I started a business on the side in which I am the sole proprietor. Fortunately it has now has become a full time job for me. As I'm setting aside the income I'm making from my business, I'm hoping if someone could tell me what percentage of my income will be owed to the government? Or does this depend on my tax bracket? I'm also an Ontario resident if that helps. Currently I'm working on a general rule of thumb that I will owe roughly 30% of my income back to the government (excluding my expenses, which are minimal at this point.)
Public Comments
- If your after-expenses taxable income is $100,000, the average tax is about 29% (fed & ontario taxes), while $50,000 taxable income is about 20%. Here is the link: http://www.morningstar.ca/globalhome/MarginalTaxCalculator/index.asp
- You need to clearly separate business income from personal income. If it's business, it is taxed at business rates, which can be higher or lower depending on the amount, but tend to be set at fewer levels (only a couple of tax brackets). If it flows into you personal bank accounts, though, it is personal income and is taxed at personal levels.
- Average rates don't really tell the full story, rather you need to focus on the marginal rate of tax on the extra income you earn. The marginal rate of tax is the percentage of tax you pay on any additional income that you earn. This is what is generally referred to as "tax brackets". In Ontario, the marginal rate structure for 2007 was as follows (leaving out the very lowest rates): $37,178 - 31.15% $62,487 - 32.98% $70,976 - 35.39% $73,622 - 39.41% $74,357 - 43.41% over $120,887 - 46.41% If you have $40K of income from other sources, the income that you earn on the next $1 of income would be taxed at a marginal rate of 31.15%. This rate would apply until your total income reached $62,487 at which point the 32.98% rate indicated above would apply to the next $1 of extra income. The rate structure will change slightly for 2008 but will be fairly close to the rates listed above.
