Ontario Surtax

Definition

The Ontario surtax is a tax imposed on top of Ontario basic personal income tax, calculated as a percentage of Ontario tax (not of taxable income) in two layers: 20% on Ontario tax above a first threshold, and an additional 36% on Ontario tax above a higher second threshold. Because the surtax is applied to Ontario tax rather than to income, it compounds the marginal rate at higher income levels. The surtax is computed on Form ON428 after the Ontario basic tax has been calculated and the non-refundable credits have been applied. It is in addition to the Ontario Health Premium.

Key rules

• The CRA's 2026 Ontario tables set the indexed thresholds:
  • First layer: 20% of basic Ontario tax above $5,818
  • Second layer: additional 36% of basic Ontario tax above $7,446
  • Combined layer: 56% on Ontario tax exceeding the second threshold
• Use the surtax base calculated by ON428, not taxable income or the final tax balance after every credit. Non-refundable credits such as the BPA reduce the base; minimum-tax and split-income rules require additional adjustments.
• At the top of the scale, the surtax effectively adds about 7.4 percentage points to the marginal Ontario rate (13.16% × 1.56 − 13.16% = approximately 7.4 percentage points).
• The ordinary dividend tax credit is deducted after surtax in ON428's calculation. Dividends are not exempt from surtax: their grossed-up taxable amount affects basic tax. Follow the form's ordering, including any minimum-tax adjustments.
• The Ontario Health Premium is separate: an additional amount up to $900 per year based on taxable income, also added on ON428.

Example

An Ontario resident's 2026 surtax base is $12,000 after applicable non-refundable credits, with no split-income or minimum-tax adjustments:

• Layer 1: ($12,000 − $5,818) × 20% = $1,236.40
• Layer 2: ($12,000 − $7,446) × 36% = $1,639.44
• Total surtax = $1,236.40 + $1,639.44 = $2,875.84

The subtotal is $14,875.84 before any later credits or reductions and the Ontario Health Premium. It is not necessarily the final tax payable.

Common mistakes

• Calculating the surtax on taxable income instead of Ontario tax. The surtax is a tax on tax, not a tax on income.
• Stopping at the 20% layer. Once Ontario tax exceeds the second threshold, both layers apply simultaneously, stacking to 56% on the marginal increment.
• Forgetting to use indexed thresholds. Thresholds change each year; using the prior-year figures understates or overstates the liability.
• Conflating the surtax with the Ontario Health Premium. The OHP is a separate charge, graduated up to $900, calculated in a different section of ON428.

Related concepts

• Ontario Personal Tax Brackets
• Ontario Basic Personal Amount
• T1 Personal Return Overview