Geraldine made $140,143.11 in Employment income last year. She had investment income of $12,383.19 and dividend income of $4,230.12. How much income tax (include both federal and provincial) did she have to pay if she lives in Ontario?
Federal Rates:
15% on the first $43,953 of taxable income +
22% on the taxable income between $ 43,953 and $87,907 +
26% on the taxable income between $87,907 and 136,270 +
29% of taxable income over $ 136,270.
Provincial Rates:
5.05% on the first $40,120 of taxable income, +
9.15% on taxable income between $40,120 and $80,242, +
11.16% on taxable income between $80,242 and $ 150,000 +
12.16% on taxable income between $150,000 and $220,000 +
13.16% on taxable income over $220,000
What steps do i follow?
just look for the proper bracket for her income, and add up the taxes for all the brackets there and below, both federal and provincial.
To calculate the income tax that Geraldine has to pay, follow these steps:
1. Determine Geraldine's total taxable income: Add her employment income, investment income, and dividend income. In this case, her total taxable income is $140,143.11 + $12,383.19 + $4,230.12 = $156,756.42.
2. Calculate the federal income tax:
- Calculate the tax for each bracket:
- The first bracket is $43,953, so the tax is 15% of $43,953.
- The second bracket is the taxable income between $43,953 and $87,907. Calculate the difference between Geraldine's taxable income and the upper limit of the first bracket, which is $87,907 - $43,953. Then, calculate the tax as 22% of this difference.
- The third bracket is the taxable income between $87,907 and $136,270. Calculate the difference between Geraldine's taxable income and the upper limit of the second bracket, which is $136,270 - $87,907. Then, calculate the tax as 26% of this difference.
- The fourth bracket is any taxable income over $136,270. Calculate the difference between Geraldine's taxable income and $136,270, then calculate the tax as 29% of this difference.
- Sum up the taxes from all brackets: Add up the taxes calculated from each bracket.
3. Calculate the provincial income tax:
- Calculate the tax for each bracket using the same methodology as the federal brackets stated above.
- Sum up the taxes from all provincial brackets.
4. Add the federal and provincial income taxes together to get the total income tax that Geraldine has to pay.
So, by following these steps, you can calculate the exact amount of income tax that Geraldine has to pay.