How do I calculate NET amount after taxes for the contract job taken in Toronto in year of 2016? Let's say, for example, I did my job for 50 CAD/hour before any taxes.
I am residing in Toronto since June of 2016. My client is in Toronto as well.
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1I'm voting to close this question as off-topic because it isn't really a good fit for the stackexchange format - recommendations for calculator websites will go out of date, tax laws will change, websites go down, etc.– user152Commented Jul 23, 2016 at 18:23
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@stacey , I changed the question. I am interested in solution of the problem (the problem - I do not know how to calculate) rather than in tools that solve the problem (on-line calculator, third party link, etc.), so I removed the need for calculator. You are right, tax laws differ from year to year, so I also added year of 2016 to specify the need. Hope the question became acceptable now and the answer will appear soon.– PauliusCommented Jul 25, 2016 at 2:01
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Well, now it seems like a question for a Canadian accountant.... not that there aren't freelance accountants. I just don't think there are any that visit this site.– ScottCommented Jul 25, 2016 at 2:29
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2 Answers
You pay a lot of taxes that are not linked 1-on-1 with a single job, so you'll never get an exact number for that. However, as a freelancer I use a very simple calculation that works accurate enough so far (the same might exist for Toronto): taking ALL taxes into account, basically 50% of what I invoice is NET, i.e. if I take all my revenue at the end of the year and subtract all that I pay in various taxes (e.g. tax on the salary I pay myself, corporation tax, social security payments, profit tax, etc.) I'm left with 50% to actually spend on net salary, investments, expenses etc.
As an unincorporated independent contractor, your income from contract work will be subject to tax as personal business income. Your net income can be calculated with the formula:
(Gross Income - Expenses) x (1 - Tax rate)
Below are the taxes that make up your tax rate:
- CPP Currently 9.9% on self-employed business income
- Average Federal Income Tax Rate (0% - 33%)
- Average Provincial Income Tax (Ontario is 0% - 13.16%)
To find the average tax rate, use the formula for each federal and provincial:
(Total Tax - Income Tax Credits) / Taxable Income
Tax rates and calculations ca be found here: http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
Tax credits vary on your personal situation, but always include the basic $11,474 for federal tax and $10,011 for Ontario tax.
