Severance Tax Calculator Ontario

How to Calculate Severance Tax in Ontario

Severance tax in Ontario is calculated based on the amount of severance pay you receive. The tax rate depends on the type of severance payment and your employment status. Here's a step-by-step guide to calculating your severance tax:

Step 1: Determine Your Severance Amount

The first step is to calculate your total severance pay. This typically includes:

• Notice pay
• Vacation pay
• Sick pay
• Other accrued benefits

Step 2: Apply the Ontario Severance Tax Rate

Once you have your total severance amount, you need to apply the appropriate Ontario severance tax rate. The tax rate varies depending on whether you're an employee or an employer.

Step 3: Calculate Your Taxable Severance

Multiply your total severance amount by the applicable tax rate to determine your taxable severance amount.

Step 4: Subtract Taxable Severance from Total Severance

Finally, subtract the taxable severance amount from your total severance to determine your net severance pay.

Ontario Severance Tax Rates

The Ontario severance tax rates vary depending on the type of severance payment and your employment status. Here are the current rates as of 2023:

Employee Severance Tax Rates

• Notice pay: 20%
• Vacation pay: 15%
• Sick pay: 10%
• Other accrued benefits: 15%

Employer Severance Tax Rates

• Notice pay: 15%
• Vacation pay: 10%
• Sick pay: 5%
• Other accrued benefits: 10%

How to Use This Calculator

Our severance tax calculator is designed to be user-friendly and accurate. Here's how to use it:

Step 1: Enter Your Severance Details

Input the amounts for each type of severance pay you're receiving.

Step 2: Select Your Employment Status

Choose whether you're an employee or an employer to apply the correct tax rates.

Step 3: Calculate Your Severance Tax

Click the "Calculate" button to determine your taxable severance amount and net severance pay.

Step 4: Review Your Results

Check the results to understand how much tax you'll owe and what your net severance pay will be.

Examples of Severance Tax Calculations

Let's look at a couple of examples to illustrate how the severance tax calculator works.

Example 1: Employee Severance

Suppose you're an employee receiving the following severance pay:

• Notice pay: $5,000
• Vacation pay: $2,000
• Sick pay: $1,000

Your total severance amount would be $8,000. Applying the employee tax rates:

• Notice pay tax: $5,000 × 20% = $1,000
• Vacation pay tax: $2,000 × 15% = $300
• Sick pay tax: $1,000 × 10% = $100

Your total taxable severance would be $1,400, and your net severance pay would be $6,600.

Example 2: Employer Severance

As an employer, you're paying the following severance:

• Notice pay: $8,000
• Vacation pay: $3,000
• Other benefits: $2,000

Your total severance amount would be $13,000. Applying the employer tax rates:

• Notice pay tax: $8,000 × 15% = $1,200
• Vacation pay tax: $3,000 × 10% = $300
• Other benefits tax: $2,000 × 10% = $200

Your total taxable severance would be $1,700, and your net severance pay would be $11,300.