Tax Rates and Take-Home Pay
An individual earning $72,000 per year in Ontario would have the following income tax rates applied in 2024:
- Federal tax rate: 20.5% on income between $50,197 and $100,392, plus 26% on income between $100,392 and $72,000
- Ontario tax rate: 9.15% on income between $49,231 and $98,462
This results in an estimated total annual tax bill of $20,719, comprised of:
- Federal taxes: $8,770
- Provincial taxes: $4,346
- CPP contributions: $3,754
- EI premiums: $1,002
After these taxes and deductions, the take-home pay on a gross salary of $72,000 per year works out to approximately $51,281, or $4,273 per month.
The average total tax rate is 28.8% and the marginal tax rate is 32.7%. This means for every additional $100 earned, $32.70 goes to taxes and $67.30 is kept as take-home pay.
Deductions
In addition to federal and provincial income taxes, the key deductions from a $72,000 gross salary in Ontario are:
CPP Contributions
All working Canadians must contribute 5.70% of pensionable earnings to the Canada Pension Plan (CPP) in 2024, up to an upper limit of $64,900. For someone earning $72,000, the maximum CPP deduction is $3,754 annually or $313 per month.
EI Premiums
Employment Insurance (EI) premiums are deducted at a rate of 1.58% in 2024, applied to an upper limit of $60,300. For a $72,000 salary, the EI deduction would be $1,002 for the full year, or $84 monthly.
Additional Deductions
There may be additional payroll deductions such as group insurance premiums, union dues, charitable donations, etc. depending on your circumstances. On average these add up to a few hundred dollars annually.
Comparison to Other Provinces
Comparing Ontario's taxes to other major provinces:
- Alberta has significantly lower average and marginal tax rates of 19.26% and 25.44% respectively on a $72,000 income. Take-home pay would be approximately $3,307 per month.
- In British Columbia, average and marginal tax rates on $72,000 are 17.58% and 23.76%, resulting in take-home pay of around $3,408 monthly.
- Quebec has higher tax rates than Ontario, with take-home pay on $72,000 being $3,241 per month after 23.5% average and 30.25% marginal rates.
So Ontario is moderately taxed compared to other large provinces, with Alberta being the most tax advantaged currently.
Is $72,000 a Good Salary?
Whether or not $72,000 represents a good salary depends greatly on your individual situation. However, some general observations in an Ontario context:
- The average individual income in Ontario is approximately $54,450, so a salary of $72,000 is 32% higher than the provincial average.
- $72,000 provides an after-tax monthly income of $4,273 which is quite comfortable for a single individual renting in many regions of Ontario. Saving and investing would be quite feasible on this salary.
- For a household with kids however, $72,000 would represent a more modest middle-class lifestyle in high cost-of-living cities like Toronto or Ottawa. You may need to budget carefully to afford housing, childcare, transportation and other family expenses.
- Someone earning $72,000 would be considered above the low income cut-off (LICO) threshold for all household sizes, meaning it provides income well above the poverty line.
- That said, $72,000 does not confer high earnings or "rich" status by any means, particularly in Toronto where the average household income is $121,200. However, it does provide a solid middle class lifestyle with some financial flexibility.
Overall, while not an exceptionally high salary, $72,000 certainly represents a comfortable living in many parts of Ontario, with the ability to meet daily needs, save, and enjoy some discretionary spending. It exceeds average individual and household incomes by a fair margin. However, to afford a nice home, raise a family, and build substantial wealth in high cost-of-living cities, a higher income would be advisable over the long term.
Conclusion
In summary, a $72,000 annual salary after taxes provides around $4,273 per month in take-home pay for an Ontario resident, based on a 28.8% average tax rate. Key deductions encompass federal and provincial income taxes, CPP contributions, and EI premiums.
This salary is 32% higher than the province's average, conferring a comfortable lifestyle for individuals and possibly families depending on region and household size. While not enough to be considered "rich", $72,000 delivers an above-average salary with room for solid savings and discretionary expenditures. It exceeds low income thresholds by a significant degree.
Compared to other major provinces, Ontario is moderately taxed at this income level. Take-home pay lags behind Alberta but exceeds British Columbia and Quebec.
For individuals and households seeking to build wealth long-term in Ontario's largest cities, a higher salary would be recommended. However $72,000 still falls into the broad middle class income range - sufficient to meet daily needs and enjoy some financial flexibility.