The Canada Pension Plan (CPP) provides retirement, disability, and survivor benefits funded by mandatory contributions from employees, employers, and self-employed individuals. Both the employee and employer each contribute 5.95% of pensionable earnings between the basic exemption ($3,500) and the Year’s Maximum Pensionable Earnings (YMPE). A CPP2 enhancement has applied since 2024, adding a second tier of contributions on earnings between the YMPE and the Year’s Additional Maximum Pensionable Earnings (YAMPE).
Quick Answer
For 2025, the YMPE is $71,300. The maximum CPP contribution for an employee is $4,034.10 (5.95% x ($71,300 – $3,500)). Employers match the employee contribution dollar for dollar. Self-employed individuals pay both portions: $8,068.20 maximum. The YAMPE for CPP2 is $81,900, and the CPP2 rate is 4% on earnings between $71,300 and $81,900 (maximum CPP2 = $426).
How CPP Contributions Are Calculated
CPP1 (base contribution):
– Pensionable earnings = employment income, minus $3,500 basic exemption
– Pensionable earnings are capped at the YMPE ($71,300 in 2025)
– Employee CPP1 = pensionable earnings x 5.95%
– Maximum employee CPP1 = ($71,300 – $3,500) x 5.95% = $4,034.10
CPP2 (enhanced contribution, 2025):
– Applies on earnings between YMPE ($71,300) and YAMPE ($81,900)
– CPP2 rate: 4% (employee) / 4% (employer)
– Maximum employee CPP2 = ($81,900 – $71,300) x 4% = $426
– No basic exemption is subtracted from CPP2 earnings
2025 CPP Key Parameters
| Parameter |
2025 Value |
| Year’s Maximum Pensionable Earnings (YMPE) |
$71,300 |
| Year’s Additional Maximum Pensionable Earnings (YAMPE) |
$81,900 |
| Basic exemption |
$3,500 |
| Employee CPP1 rate |
5.95% |
| Employer CPP1 rate |
5.95% (matching) |
| Employee CPP2 rate |
4% |
| Maximum employee CPP1 |
$4,034.10 |
| Maximum employee CPP2 |
$426.00 |
| Maximum total employee CPP (CPP1 + CPP2) |
$4,460.10 |
| Maximum self-employed CPP1 |
$8,068.20 |
| Maximum self-employed CPP2 |
$852.00 |
Source: CRA T4032, Payroll Deductions Tables, 2025.
CPP Enhancement (CPP2) Background
The CPP enhancement was phased in beginning January 2019. The first enhancement phase (CPP2, tier 1) applied a gradually increasing rate on pensionable earnings up to the YMPE. Starting in 2024, a second tier of CPP earnings — the YAMPE — was introduced. Contributions on earnings above the YMPE and up to the YAMPE (CPP2 tier 2) build entitlement to an additional retirement benefit separate from the base CPP.
CPP Tax Deduction
Employee CPP contributions generate a federal non-refundable tax credit at the lowest federal rate (15% in 2025). Self-employed individuals deduct 50% of their total CPP contribution as a business expense (line 22200) and receive a tax credit for the other 50% (Schedule 8). CPP2 contributions generate only a tax deduction (not a credit) for both employees and self-employed.
Verified Against Source
YMPE and YAMPE are set annually by the federal government pursuant to the Canada Pension Plan Act. The 2025 YMPE of $71,300 was announced by ESDC in November 2024. Payroll rates appear in CRA T4032 (Payroll Deductions Tables). Source: canada.ca/en/revenue-agency/services/forms-publications/payroll/t4032-payroll-deductions-tables.html
Edge Cases
Multiple employers: Each employer deducts CPP independently. If total employee CPP deducted across employers exceeds the annual maximum, the excess is refunded on your T1 return (line 44800).
Age limits: CPP contributions are required from age 18 to 70 if you have employment income. Once you reach 65, you can elect to stop contributing by completing Form CPT30.
QPP: Quebec residents contribute to the Quebec Pension Plan (QPP) instead of CPP. QPP has separate but similar rates; QPP2 also applies since 2024.
Part-time and seasonal workers: The $3,500 basic exemption is not pro-rated for part-year workers. A worker earning less than $3,500 in a year pays no CPP contributions.
Frequently asked questions
- How much is the maximum CPP contribution in 2025?
- The maximum employee CPP contribution in 2025 is $4,034.10 (CPP1) plus $426.00 (CPP2), totalling $4,460.10. Employers match the CPP1 contribution dollar for dollar. Self-employed individuals pay both sides of CPP1: $8,068.20 maximum, plus $852.00 for CPP2.
What is the YMPE for 2025?
The Year's Maximum Pensionable Earnings (YMPE) for 2025 is $71,300. This is the income ceiling above which CPP1 contributions do not apply. CPP2 then applies on the next bracket, from $71,300 to $81,900 (the YAMPE).
How is the CPP contribution calculated?
Employee CPP1 = (employment income, capped at $71,300) minus $3,500 basic exemption, multiplied by 5.95%. CPP2 = earnings between $71,300 and $81,900 multiplied by 4%. If your income is below $3,500 you pay no CPP. Above $81,900 you have paid the maximum.
What is CPP2 and who pays it?
CPP2 is the second tier of the CPP enhancement that began in 2024. It applies a 4% contribution rate on employment earnings between $71,300 (YMPE) and $81,900 (YAMPE) in 2025. The maximum CPP2 employee contribution is $426. It builds entitlement to an additional pension benefit on top of base CPP.
Do self-employed people pay more CPP?
Yes. Self-employed individuals pay both the employee and employer share of CPP1: 11.9% of pensionable earnings up to the YMPE (maximum $8,068.20 in 2025) plus 8% for CPP2 (maximum $852.00). Half of the CPP1 contribution is deductible as a business expense; the other half generates a tax credit.
What tax benefit do CPP contributions provide?
Employee CPP1 contributions generate a non-refundable federal tax credit at 15% (reducing federal tax by $604.80 at maximum contribution in 2025). CPP2 contributions generate only a deduction, not a credit. Self-employed: 50% of CPP1 is deducted as a business expense on line 22200; the other 50% generates the tax credit on Schedule 8.
Do I pay CPP on all my income?
CPP applies only to insurable employment income and net self-employment income, not investment income, rental income, or pensions. The basic exemption of $3,500 exempts the first portion. The YMPE ($71,300 in 2025) caps CPP1 contributions, and the YAMPE ($81,900) caps CPP2.
What happens if I had multiple employers and overpaid CPP?
Each employer deducts CPP independently without knowing what other employers deducted. If total CPP deducted from all employers exceeds the annual maximum ($4,460.10 in 2025), the CRA refunds the excess when you file your T1 (line 44800). Employers cannot refund overpayments directly for CPP the way they can for EI.
Can I stop contributing to CPP after age 65?
Yes. If you are 65 to 70 and are receiving a CPP or QPP pension, you can elect to stop making CPP contributions by completing Form CPT30 and giving it to your employer. Once filed, your employer stops deducting CPP. You can revoke this election once per calendar year. At age 70, CPP contributions stop automatically.
Is Quebec CPP different?
Quebec residents contribute to the Quebec Pension Plan (QPP) rather than CPP. QPP has its own YMPE, rates, and benefit structure, administered by Retraite Quebec. QPP rates are similar to CPP but not identical. QPP2 applies on earnings above the Quebec YMPE to the YAMPE, similar to the federal CPP2 structure.
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Frequently asked questions
- How much is the maximum CPP contribution in 2025?
- The maximum employee CPP contribution in 2025 is $4,034.10 (CPP1) plus $426.00 (CPP2), totalling $4,460.10. Employers match the CPP1 contribution dollar for dollar. Self-employed individuals pay both sides of CPP1: $8,068.20 maximum, plus $852.00 for CPP2.
- What is the YMPE for 2025?
- The Year's Maximum Pensionable Earnings (YMPE) for 2025 is $71,300. This is the income ceiling above which CPP1 contributions do not apply. CPP2 then applies on the next bracket, from $71,300 to $81,900 (the YAMPE).
- How is the CPP contribution calculated?
- Employee CPP1 = (employment income, capped at $71,300) minus $3,500 basic exemption, multiplied by 5.95%. CPP2 = earnings between $71,300 and $81,900 multiplied by 4%. If your income is below $3,500 you pay no CPP. Above $81,900 you have paid the maximum.
- What is CPP2 and who pays it?
- CPP2 is the second tier of the CPP enhancement that began in 2024. It applies a 4% contribution rate on employment earnings between $71,300 (YMPE) and $81,900 (YAMPE) in 2025. The maximum CPP2 employee contribution is $426. It builds entitlement to an additional pension benefit on top of base CPP.
- Do self-employed people pay more CPP?
- Yes. Self-employed individuals pay both the employee and employer share of CPP1: 11.9% of pensionable earnings up to the YMPE (maximum $8,068.20 in 2025) plus 8% for CPP2 (maximum $852.00). Half of the CPP1 contribution is deductible as a business expense; the other half generates a tax credit.
- What tax benefit do CPP contributions provide?
- Employee CPP1 contributions generate a non-refundable federal tax credit at 15% (reducing federal tax by $604.80 at maximum contribution in 2025). CPP2 contributions generate only a deduction, not a credit. Self-employed: 50% of CPP1 is deducted as a business expense on line 22200; the other 50% generates the tax credit on Schedule 8.
- Do I pay CPP on all my income?
- CPP applies only to insurable employment income and net self-employment income, not investment income, rental income, or pensions. The basic exemption of $3,500 exempts the first portion. The YMPE ($71,300 in 2025) caps CPP1 contributions, and the YAMPE ($81,900) caps CPP2.
- What happens if I had multiple employers and overpaid CPP?
- Each employer deducts CPP independently without knowing what other employers deducted. If total CPP deducted from all employers exceeds the annual maximum ($4,460.10 in 2025), the CRA refunds the excess when you file your T1 (line 44800). Employers cannot refund overpayments directly for CPP the way they can for EI.
- Can I stop contributing to CPP after age 65?
- Yes. If you are 65 to 70 and are receiving a CPP or QPP pension, you can elect to stop making CPP contributions by completing Form CPT30 and giving it to your employer. Once filed, your employer stops deducting CPP. You can revoke this election once per calendar year. At age 70, CPP contributions stop automatically.
- Is Quebec CPP different?
- Quebec residents contribute to the Quebec Pension Plan (QPP) rather than CPP. QPP has its own YMPE, rates, and benefit structure, administered by Retraite Quebec. QPP rates are similar to CPP but not identical. QPP2 applies on earnings above the Quebec YMPE to the YAMPE, similar to the federal CPP2 structure.