What gets deducted from your paycheck in Canada

Gross pay vs net pay

Gross pay is the full amount you earned. Net pay, also called take-home pay, is what lands in your bank account after every deduction. The gap between them is not one thing but a stack of separate deductions, each with its own rules. Here they are, roughly in the order they appear on a typical stub.

1. Federal income tax

Everyone in Canada pays federal income tax in graduated brackets: 14% on the first $58,523 of taxable income, 20.5% up to $117,045, 26% up to $181,440, 29% up to $258,482, and 33% above that in 2026. Only the slice of income inside each bracket is taxed at that bracket's rate, and the first $16,452 is tax-free thanks to the federal basic personal amount. Our full guide to the 2026 tax brackets walks through the math with a worked example.

2. Provincial or territorial income tax

Your province runs its own brackets on the same income, with its own rates and basic personal amount. In 2026, Ontario's brackets run from 5.05% to 13.16%, Alberta's from 8% to 15%, and British Columbia's from 5.6% to 20.5%. Quebec is the outlier: it collects its own income tax separately, and Quebec residents get a 16.5% federal abatement that shrinks the federal portion of the bill.

3. CPP or QPP contributions

In 2026 you contribute 5.95% of earnings between $3,500 and $74,600 to the Canada Pension Plan, plus 4% on earnings from $74,600 to $85,000, up to a yearly maximum of $4,646.45. Quebec workers contribute to QPP instead, at 6.3% up to a maximum of $4,895.30. Your employer matches your contribution. Read how CPP and EI deductions work for the full breakdown, including why these lines disappear from late-year paycheques.

4. EI premiums

Employment Insurance costs 1.63% of your insurable earnings up to $68,900 in 2026, capped at $1,123.07 for the year. In Quebec the rate is 1.3%, capped at $895.70. Like CPP, EI stops coming off once you hit the yearly maximum, which is one reason December paycheques can look pleasantly large.

5. The Ontario Health Premium

Ontario is the only province with a separate health premium line on the pay stub. It ranges from $0 to $900 a year depending on your taxable income, and most full-time earners land somewhere in the middle. It is calculated with its own formula, not from your tax brackets, so it appears as its own line.

Pre-tax deductions: RRSP, pension, and union dues

Some deductions come off before income tax is calculated, which shrinks the income your tax is based on. The common ones are RRSP contributions made through payroll, employer pension plan (RPP) contributions, and union dues. A $2,000 RRSP contribution does not just save for retirement; it also removes $2,000 from your taxable income for the year. Note the fine print: these deductions do not reduce CPP or EI, which are calculated on your full earnings.

Taxable benefits: the sneaky addition

Sometimes your stub shows income you never received as cash. If your employer pays for your life insurance, provides a parking spot, or subsidizes your transit pass, the value counts as taxable income. It gets added to your gross, taxed like wages, but never paid out to you. This is why the gross pay on your stub can be higher than your salary divided by pay periods.

The order everything comes off

Payroll follows a fixed order. First, pre-tax deductions such as RRSP and pension contributions reduce your taxable income. Then federal and provincial income tax are calculated on what is left. CPP, QPP, and EI are calculated separately on your full earnings, ignoring the pre-tax deductions. Finally, every deduction is subtracted from gross pay to give net pay.

Why the numbers move through the year

Even with a steady salary, your deductions shift from pay to pay. Hitting the CPP or EI yearly maximums removes those lines for the rest of the year. Bonuses are withheld as though you earned at that pace all year, which usually means extra tax that you get back at filing time. Mid-year raises change your bracket math partway through. The calculator estimates from a steady annual salary, so treat its result as a planning figure rather than a promise about any single paycheque.

Deductions you chose: benefits premiums

Beyond the mandatory lines, many stubs show premiums for benefits you signed up for: extended health and dental coverage, life insurance top-ups, or disability insurance. These are usually deducted after tax, so they do not reduce your taxable income, though some employer-administered health plans are structured to be tax-advantaged. Because you chose them during onboarding or open enrollment, they are easy to forget. If a line you do not recognize appears, your benefits booklet, not your tax return, is the place to look.

What does not come off your pay

A few taxes people expect to see are mercifully absent. GST and HST are consumption taxes, so they appear on receipts, not pay stubs. Property tax is billed by your municipality, not your employer. And income tax is the only tax on the stub: there is no separate federal or provincial sales tax line, and no "Canada Pension Tax," because CPP is a contribution toward your own pension, not a tax.

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