Take Home Pay and Tax Rates
For a gross annual salary of $80,000 in Ontario in 2024, the total income tax deduction is estimated to be $20,396, resulting in a net annual take home pay of $59,604, or $4,967 per month.
The average tax rate is 24.9% and the marginal tax rate is 31.5%. This means on average, 24.9% of total income is paid in taxes, while any additional income earned will be taxed at 31.5%.
Specifically, the tax brackets and rates are:
- 5.05% on the first $49,231
- 9.15% on $49,231 to $98,463
- 11.16% on $98,463 to $150,000
- 12.16% on $150,000 to $220,000
- 13.16% on income over $220,000
So the $80,000 salary falls within the third tax bracket, with a rate of 11.16% applied.
Deductions
The total tax deduction of $20,396 is comprised of:
- Federal tax: $10,411
- Provincial tax: $5,228
- Canada Pension Plan (CPP): $3,754
- Employment Insurance (EI) premiums: $1,002
These mandatory payroll deductions reduce taxable income.
Additionally, voluntary Registered Retirement Savings Plan (RRSP) contributions can be deducted to lower taxable income. The maximum deduction is 18% of previous years' earned income.
Comparison to Other Provinces
Compared to other provinces, Ontario has a middle-of-the-pack tax rate on an $80,000 salary. The lowest net income is in Quebec at $56,711 after 29.1% average tax. The highest is in Nova Scotia with a net income of $56,662 after 29.2% tax.
Ontario's net income of $59,604 is higher than any Atlantic province, as well as Manitoba and Saskatchewan. It is moderately lower than Alberta and British Columbia in western Canada.
Is $80,000 a Good Salary?
The average individual income in Ontario in 2021 was $55,300, so an $80,000 salary is 45% higher. Overall, this is considered a good above-average salary.
However, the cost of living, particularly housing, is quite high in cities like Toronto. While definitely a comfortable salary, $80,000 does not qualify as wealthy given the expenses for an individual or family.
Some key reference points for context:
- Average household income in Ontario: $107,800
- Median pre-tax household income in Toronto: $102,721
- Living wage for Toronto family of 4: $83,000
- Maximum EI insurable earnings: $60,300
So an $80,000 salary is reasonable to live comfortably by yourself or support a small family, but likely not enough to own a single-family home in Toronto.
Tax Planning Opportunities
There are a few ways to reduce taxes owed on an $80,000 salary in Ontario:
RRSP Contributions: As mentioned, contributing to an RRSP lowers taxable income. At an $80,000 income level, the tax savings from the deduction outweigh the future taxes paid on withdrawals for most people. Maximizing RRSP contributions up to the 18% deduction limit is usually advisable.
Tax-Free Savings Account (TFSA): While TFSA contributions do not reduce taxable income, investment gains and withdrawals are tax-free. This complements RRSPs nicely for retirement savings. The current 2024 TFSA limit is $6,500.
Home Office Expenses: If you work from home, even just part of the time, related expenses like office supplies and internet can be deducted. This further reduces taxable salary income.
Child Care Expenses: Paying for child care also qualifies as a deduction as long as the expenses are incurred to earn employment income. This includes daycare, nanny services, day camps during school breaks, and more.
Moving Expenses: If you have recently moved to start a new job, moving expenses can be deducted in Ontario. This includes transportation, storage, and meals during the move.
Medical Expenses: Unreimbursed medical expenses over 3% of net income can be claimed as a tax credit to reduce taxes payable. Things like dental work, prescriptions, therapy, and more count.
Conclusion
In summary, a gross salary of $80,000 per year results in an average take-home pay of $59,604 after 24.9% tax in Ontario. This places Ontario with moderately high taxes compared to other provinces. To reduce taxes, RRSP contributions, child care deductions, and other tax planning strategies can be utilized. While not considered a luxury salary, $80,000 provides a comfortable living in most of Ontario.