A charge on tax, not on income
Ontario brackets apply to taxable income. The surtax works one step later: after Ontario tax has been reduced by non-refundable credits (and any minimum tax carryover), the result is tested against two thresholds on Form ON428. Ontario tax on split income is taken out of the amount tested.
On the 2025 form, if that amount is more than $5,710, the surtax is 20% of the excess over $5,710. If it is also more than $7,307, a further 36% of the excess over $7,307 is added. The two pieces are added together and then added to your Ontario tax. Check the form for the year you are filing, because the thresholds are stated per year.
An illustrative example
Suppose Ontario tax after credits is $8,000, using the 2025 thresholds. The first piece is 20% of $2,290 (the amount over $5,710), which is $458. The second is 36% of $693 (the amount over $7,307), which is about $249. The surtax is about $707, so Ontario tax before other items becomes about $8,707.
If Ontario tax after credits were $6,500, only the first piece would apply: 20% of $790, or $158. If it were $5,710 or less, there would be no surtax. The figures are round and illustrative, and they leave out the health premium and other parts of the return.
Why it raises the effective rate
Once both thresholds are passed, every extra dollar of Ontario tax carries 20% plus 36% on top, so it becomes $1.56 in total. An Ontario bracket rate of 11.16% therefore costs about 17.4% on the next dollar of income, before the federal rate is added. The same arithmetic means a non-refundable credit or deduction can save more than the bracket rate alone suggests.
This is a common gap in quick estimates. Adding the federal and Ontario bracket rates, as in the marginal tax rate, understates the tax for anyone whose Ontario tax is above the thresholds. The Ontario dividend tax credit is subtracted after the surtax on the 2025 form, so dividend income needs its own calculation.
What to discuss with your accountant
Ask whether you are above one or both thresholds and what your true Ontario marginal rate is after the surtax. That matters when you decide how much to contribute to an RRSP, whether to defer income, or how to mix salary and dividends from a corporation.
Bring last year’s notice of assessment and an estimate of this year’s income, credits and any split income. The thresholds change with the form, so a rule of thumb from an earlier year can mislead. The health premium and tax reduction are separate Ontario amounts worth reading alongside this one.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- 2026 personal income tax rates and bracketsCanada Revenue Agency
- Ontario tax information for 2025Canada Revenue Agency
- Form ON428, Ontario Tax (2025)Canada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.