How it's calculated
Employers across Canada work out the tax to take off each paycheque with the formulas the Canada Revenue Agency publishes for payroll software, the T4127 Payroll Deductions Formulas. Quebec employers use the federal formulas for federal tax and Revenu Québec's own formulas for Quebec tax. The calculator applies both for the 2026 tax year (1 January to 31 December 2026).Canada Revenue Agency
- Federal income tax. 14% up to $58,523, 20.5% up to $117,045, 26% up to $181,440, 29% up to $258,482 and 33% above. 2026 is the first full year at the lower bottom rate.
- Federal credits. The basic personal amount of $16,452 (reduced to $14,829 on higher incomes), the Canada employment amount of $1,501, and your base CPP and EI contributions, all credited at the lowest rate.
- Provincial or territorial tax. Each province's brackets and basic personal amount, with Ontario's surtax, Ontario Health Premium and tax reduction, the BC tax reduction, Alberta's supplemental credit and Yukon's employment amount where the T4127 formulas include them.
- CPP. 5.95% of pay between the $3,500 basic exemption and $74,600, up to $4,230.45. CPP2 is 4% of pay between $74,600 and $85,000.Canada Revenue Agency
- EI. 1.63% of insurable earnings up to $68,900, a maximum of $1,123.07.Canada Revenue Agency
- Quebec. QPP at 6.3% replaces CPP, EI is lower at 1.3%, QPIP adds 0.43% up to $103,000, federal tax is cut by the 16.5% Quebec abatement, and Quebec tax runs from 14% to 25.75%.Revenu Québec
The formula
For each province except Quebec (T4127 Option 1):
- Taxable income A = salary − RRSP/pension contributions from pay − enhanced CPP (the first additional CPP and CPP2, which are deducted rather than credited).
- Federal tax T1 = R × A − K − K1 − K2 − K4, where R and K come from the bracket A falls in, K1 = lowest rate × basic personal amount, K2 = lowest rate × (base CPP + EI) and K4 = lowest rate × the Canada employment amount.
- Basic provincial tax T4 = V × A − KP − K1P − K2P (− K4P in Yukon, − K5P in Alberta), using the province's lowest rate for the credits.
- Provincial tax T2 = T4 + Ontario surtax + Ontario Health Premium − Ontario or BC tax reduction.
- Tax per paycheque = (T1 + T2) ÷ the number of pays in the year.
In Quebec, Quebec taxable income = salary − RRSP/pension − the deduction for workers (6% of pay, up to $1,450) − additional QPP; Quebec tax = rate × income − constant − 14% × the basic personal amount of $18,952.
Worked example
A $75,000 salary in Ontario paid every two weeks takes home $2,189 a paycheque, or $56,926 a year.
| Line | Per year | Per month | Every 2 weeks |
|---|---|---|---|
| Gross salary | $75,000 | $6,250 | $2,885 |
| Federal income tax | -$8,259 | -$688 | -$318 |
| Ontario income tax | -$4,446 | -$370 | -$171 |
| CPP contributions | -$4,230 | -$353 | -$163 |
| CPP2 (second additional) | -$16 | -$1 | -$1 |
| EI premiums | -$1,123 | -$94 | -$43 |
| Take-home pay | $56,926 | $4,744 | $2,189 |
The same salary takes home $53,965 in Quebec, $57,711 in British Columbia and $57,362 in Alberta.
Assumptions and limitations
- Basic claim only. It assumes TD1 claim code 1: the basic personal amounts and nothing else (no spouse, dependant, disability, tuition or pension amounts). Extra credits on your TD1 lower your tax.
- Paycheque tax, not your tax return. These are the amounts your employer deducts. Credits and deductions you claim when you file, and provincial low-income reductions applied on the return, can change your final tax.
- Same pay all year. Pay is spread evenly over the year. In practice CPP and EI stop once you reach the yearly maximum, so later paycheques are larger; the yearly totals are the same.
- Mid-year changes. British Columbia, Prince Edward Island and Newfoundland and Labrador changed their 2026 tax after January. The calculator uses the full-year 2026 rules; from July employers use prorated rates so the year's total matches.Canada Revenue Agency
- Not included: bonuses, commissions, taxable benefits, union dues, the northern residents deduction and labour-sponsored fund credits.
For CPP and EI on their own, including what your employer pays, see the CPP and EI calculator. To see what an RRSP contribution saves, use the RRSP tax savings calculator.