When you receive your paycheck in Canada, the amount you see isn’t your full earnings. Your employer withholds several mandatory deductions before paying you.
These deductions cover your income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.
Understanding how much is taken off helps you plan your finances and confirm your pay is correct.
How is income tax calculated on my paycheck?
Your employer uses CRA’s federal and provincial tax tables to calculate the income tax withheld from your pay. The amount depends on:
- Your total income
- Your province or territory of employment
- Your federal and provincial tax credits (from your TD1 and TD1ON, TD1BC, etc., forms)
- Any additional deductions you requested
Income tax is deducted using a progressive rate system.
This means the higher your income, the higher the rate you pay on the upper portion of your income.
What percentage of my income goes to federal and provincial tax?
The federal tax rates for 2026 are the same across Canada:
- 15% on the first $55,867 of taxable income
- 20.5% on the next $55,866
- 26% on the next $61,472
- 29% on the next $72,814
- 33% on income over $246,019
Each province and territory adds its own tax on top of this. For example:
- Ontario charges between 5.05% and 13.16% depending on income.
- British Columbia ranges from 5.06% to 20.5%.
- Alberta charges a flat 10% to 15% depending on income.
Employers combine both federal and provincial rates to determine your total tax withholding.
What is CPP and how much is deducted?
If you are 18 or older and earn more than $3,500 per year, you contribute to the Canada Pension Plan (CPP). The CPP helps provide income during retirement, disability, or to your survivors.
In 2026, the CPP contribution rate is 5.95% of your pensionable earnings, up to a yearly maximum. Your employer matches your contribution dollar-for-dollar.
For 2026, the maximum pensionable earnings limit is $68,500, and the basic exemption is $3,500.
So, the maximum annual contribution for employees is around $3,754.45.
How does EI deduction work?
Employment Insurance (EI) provides temporary income support if you lose your job, take parental leave, or experience certain life events.
The EI premium rate for 2026 is 1.66% of insurable earnings, up to a maximum annual contribution of about $1,050. Your employer contributes 1.4 times your deduction.
The yearly maximum insurable earnings limit is approximately $63,200, but you can check the official yearly update here: EI premium rates and maximums.
How can I estimate my paycheck after deductions?
You can use the CRA’s official Payroll Deductions Online Calculator (PDOC) to estimate how much tax, CPP, and EI will be taken from your pay. It is free and regularly updated:
CRA Payroll Deductions Online Calculator.
This calculator gives an accurate estimate of your net pay (the amount you actually take home).
Are there any other deductions from my paycheck?
Yes. Besides tax, CPP, and EI, your employer may deduct other items such as:
- Group insurance premiums
- Union dues
- Registered Retirement Savings Plan (RRSP) contributions
- Charitable donations or benefit program fees
These depend on your workplace agreements and benefits plan, not federal law.
Can I reduce how much tax is deducted from my pay?
You can reduce tax deductions by updating your TD1 form if you qualify for more credits.
For example, you may claim the basic personal amount, tuition, disability, or caregiver amounts.
If your total tax credits are higher, less tax will be deducted from each paycheck.
Why does my coworker’s paycheck look different from mine?
Even with the same salary, deductions can differ because of:
- Province or territory of employment
- Personal tax credit claims
- Benefit participation (like RRSP or insurance plans)
- Additional voluntary deductions
It’s normal for two employees earning the same gross pay to have slightly different net pay.