$40,000 After Tax in Ontario (2026)

Is $40,000 a good salary in Ontario?

A $40,000 salary is below the typical Ontario paycheque: Statistics Canada's Canadian Income Survey puts the median employment income of Ontarians who had any earnings at $46,100 in 2024, and the average at $62,500. For workers aged 25 to 54 the median was $59,500, so $40,000 is more typical of early-career pay than of a mid-career salary.

It is still well above the legal floor. Ontario's general minimum wage rose to $17.95 an hour on October 1, 2026, which works out to about $35,003 a year at 37.5 hours a week. $40,000 is $20.51 an hour on that basis, or $17.09 after tax, CPP and EI.

Statistics Canada's payroll survey gives a higher, mean-based benchmark: Ontario average weekly earnings of $1,391.19 in July 2026, about $72,342 a year, pulled up by high earners.

The LIFT credit: why your Ontario tax on $40,000 is lower at filing time

On a $40,000 salary your real Ontario income tax for 2026 is about $518 lower than the $1,153 shown above, because of the Low-income Individuals and Families Tax (LIFT) credit. Payroll formulas leave it out, so the difference comes back as part of your refund when you file the ON428 with your T1 return.

According to Ontario's Ministry of Finance, LIFT is the lesser of $875 and 5.05% of employment income, reduced by 5% of adjusted individual net income above $32,500 (or family net income above $65,000, if that gives a bigger reduction). Worked through for $40,000:

• Starting amount: the lesser of $875 and 5.05% × $40,000 = $2,020 → $875.
• Net income after the enhanced CPP deduction: about $39,635, which is $7,135 over the $32,500 threshold.
• Reduction: 5% × $7,135 = $357, leaving a credit of about $518.
• With LIFT, total take-home is closer to $33,850.

Benefits and credits you can still get on $40,000

A single person on $40,000 has already lost the Ontario sales tax credit, but parents keep large amounts. The credit is $378 for each adult and each child for July 2026 to June 2027, reduced by 4% of a single person's adjusted net income above $29,047; on net income of about $39,635 the $424 reduction wipes it out. Single parents and couples use the higher family threshold of $36,309, so a single parent with one child on the same income would still get about $623.

The federal Canada Groceries and Essentials Benefit (the GST/HST credit's new name from July 2026) only starts shrinking above $46,432, so at this income a single adult gets the full $679 a year at current rates and a single parent with one child about $1,124. Like the CCB below, these benefits are recalculated each July from the return for the previous year, so your 2026 salary sets the payments that start in July 2027, provided you file by April 30, 2027.

RRSP, TFSA or FHSA on a $40,000 income

At $40,000 a TFSA is usually a better place for savings than an RRSP. Your combined federal and Ontario income tax rate on the next dollar is only 19.1% (the 30.1% marginal rate above also includes CPP and EI, which an RRSP deduction does not reduce), so a $4,000 RRSP contribution saves only about $1,112 of income tax. The deduction also lowers the net income used for LIFT, so while you are in the LIFT phase-out range each deducted dollar restores another 5% of credit; even so, unused RRSP room carries forward and is usually worth more later in a higher bracket.

A TFSA has no deduction, but withdrawals are tax-free and, according to the CRA's TFSA guide (RC4466), do not affect federal income-tested benefits and credits such as the CCB and the Groceries and Essentials Benefit. The annual TFSA dollar limit is $7,000 for 2026. If you are saving for a first home, a first home savings account (FHSA) gives both: contributions of up to $8,000 a year are deductible like an RRSP and qualifying withdrawals are tax-free like a TFSA, according to the CRA.

A raise matters more than tax planning at this level: going from $40,000 to $42,000 adds $1,397 to take-home pay, and the LIFT credit you claim at filing time shrinks by about $99 at the same time.