A Canadian paycheque looks smaller than your stated salary because four deductions come off before you see the money: federal income tax, provincial income tax, Canada Pension Plan (CPP), and Employment Insurance (EI). On a $75,000 Ontario salary, gross pay of about $2,884 biweekly becomes roughly $2,200 net — about 23% goes to withholdings.
Quick answer: CPP at 5.95%, EI at 1.63%, plus federal and provincial tax based on your TD1 form. Tax is the largest piece for most earners. CPP and EI cap out partway through the year for high earners.
What this means: Withholding is an estimate of your annual tax based on each pay extrapolated to a full year. If your income is uneven (bonuses, contract work, multiple employers) you may owe or be refunded a meaningful amount at tax time.
What to do next: Plug in your salary, pay frequency, and province to see exactly where your paycheque goes. Calculate take-home pay →
The four deductions on every paycheque
- Federal income tax — based on CRA tax tables and your TD1 form claims.
- Provincial income tax — same idea but using your province’s TD1.
- CPP (Canada Pension Plan) — 5.95% on pensionable earnings between $3,500 and $74,600. CPP2 at 4% applies between $74,600 and $85,000.
- EI (Employment Insurance) — 1.63% on insurable earnings up to $68,900 (outside Quebec). Maximum employee EI premium for 2026 is $1,123.07.
2026 deduction rates and ceilings
| Deduction | Rate | 2026 ceiling | 2026 employee max |
|---|---|---|---|
| CPP | 5.95% | $74,600 (YMPE) | $4,230.45 |
| CPP2 | 4.00% | $85,000 (YAMPE) | $416.00 |
| EI (outside Quebec) | 1.63% | $68,900 (MIE) | $1,123.07 |
| EI (Quebec) | 1.26% | $68,900 (MIE) | $868.14 |
| Federal tax | 14% – 33% | Bracketed | Varies |
| Provincial tax | Varies | Bracketed | Varies |
How tax withholding works
Your employer uses CRA’s payroll deductions formulas (PDOC) or tax tables to estimate how much tax to withhold per pay. The formula takes your pay, multiplies it by your pay frequency to project a notional annual income, applies federal and provincial brackets and your TD1 claims, and divides the resulting annual tax by the number of pays in the year.
This is an estimate, not a reconciliation. If you have other income, you should check whether your withholding is too low. If you have deductions (RRSP contributions through payroll, union dues) you can ask the employer to reduce withholding using form T1213.
The TD1 form: what you claimed matters
When you started your job, you filled out a federal TD1 and a provincial TD1. These tell the employer what personal credits to apply when calculating withholding. The federal basic personal amount for 2026 is between $14,538 and $16,929 depending on your income (the BPA reduces above $173,205 of income). Most provinces have their own basic amount layered on top.
If you have multiple jobs and only one TD1 is filled out claiming the personal amount, you may be under-withholding. CRA recommends claiming the personal credit only on your highest-paying job.
CPP and EI stop partway through the year for high earners
Because CPP caps at $4,646.45 (regular + CPP2) and EI caps at $1,123.07 (outside Quebec) for 2026, high earners hit those limits during the year and the deductions disappear from later paycheques. For someone earning $120,000 biweekly:
- EI premiums stop in late September once year-to-date insurable earnings hit $68,900
- CPP stops in early October once year-to-date pensionable earnings hit $74,600
- CPP2 stops in early November once year-to-date pensionable earnings hit $85,000
You may notice a step-up in net pay in the last few months of the year for this reason.
Worked example: $75,000 salary in Ontario
Annual gross $75,000, biweekly pay of $2,884.62. TD1 claims at the basic personal amount only.
| Component | Per pay | Annual |
|---|---|---|
| Gross pay | $2,884.62 | $75,000.00 |
| CPP (5.95%) | $163.71 | $4,254.25 (capped at $4,230.45) |
| EI (1.63%) | $47.02 | $1,122.07 (capped at $1,123.07) |
| Federal tax (est.) | $293 | $7,620 |
| Ontario tax (est.) | $159 | $4,135 |
| Net pay | $2,221.89 | $57,768.18 |
Take-home rate: about 77% of gross. Effective tax + payroll deduction rate: 23%. Your actual number will vary based on RRSP contributions, union dues, benefits, and other credits.
Why your withholding may not match your tax owing
- Multiple jobs — each employer applies the basic personal amount, so combined withholding is too low
- Bonuses — CRA’s bonus method may over- or under-withhold depending on your average tax rate (see How bonuses are taxed in Canada)
- RRSP contributions outside payroll — these reduce your actual tax owing but employer doesn’t know about them
- Investment or rental income — not captured in payroll withholding
- Mid-year job changes — the new employer doesn’t see prior earnings, so brackets may be miscalculated
Frequently asked questions
- What deductions come off my paycheque in Canada?
- Four standard deductions: federal income tax, provincial income tax, CPP (5.95%), and EI (1.63% outside Quebec).
- How much EI is deducted in 2026?
- 1.63% of insurable earnings outside Quebec, up to a maximum of $1,123.07 for the year. Quebec residents pay 1.26% to a maximum of $868.14.
- Why does my paycheque go up later in the year?
- If you earn above the CPP or EI ceilings, the deductions stop once you hit the annual maximums. EI typically stops around late September, CPP around early October at $75,000+ salaries.
- Why is my take-home pay less than I expected?
- Most likely a higher tax bracket on your TD1 setup, lower personal credits than estimated, or year-to-date CPP and EI not yet at the cap.
- Can I reduce my withholding for RRSP contributions?
- Yes. File form T1213 with CRA to authorize your employer to reduce tax withholding for regular RRSP contributions made outside of payroll.
- What is the TD1 form and why does it matter?
- The TD1 tells your employer which personal tax credits to apply when calculating withholding. Filing it incorrectly, or claiming the personal amount on more than one job, leads to under-withholding.
- Does Quebec have different deductions?
- Yes. Quebec uses QPP instead of CPP (6.40% rate) and a lower EI rate (1.26%). Quebec also has its own provincial tax administered by Revenu Québec.