Gross vs Net Income Canada 2026

Gross Income vs Net Income: The Basics

Gross income is the total amount you earn before any deductions — the number on your employment contract or offer letter. Net income (take-home pay) is what actually lands in your bank account after federal income tax, provincial income tax, CPP contributions, and EI premiums are deducted. For most Canadian workers earning $60,000–$100,000, net income is typically 68–78% of gross income depending on province.

Understanding the difference is critical for financial planning. A $90,000 job offer in Ontario doesn't mean $90,000 to spend — it means approximately $64,500–$66,000 to spend. The $23,500–$25,500 gap goes to government, and understanding where exactly it goes helps you optimize deductions (RRSP, pension, childcare) to legitimately reduce your tax burden.

What Gets Deducted from Your Paycheque

1. Federal Income Tax

Canada uses a graduated federal income tax system. In 2026, the federal brackets are:

Everyone also gets the Basic Personal Amount (BPA) tax credit — $15,705 in 2026 — which is worth $2,355 off your federal tax bill (15% × $15,705). This means the first ~$15,705 of income is effectively tax-free federally.

2. Provincial Income Tax

Every province except Alberta levies additional provincial income tax on top of federal. Provincial rates and brackets vary significantly — this is the primary reason a $100,000 salary has very different take-home values in different provinces:

3. Canada Pension Plan (CPP)

CPP contributions in 2026 are 5.95% of employment income between the basic exemption ($3,500) and the Year's Maximum Pensionable Earnings (YMPE: $71,300). Maximum employee contribution: $4,038/year. CPP2 (second enhanced CPP tier) applies at 4% on earnings between $71,300 and $81,900, adding up to $424 maximum. In return, you earn CPP retirement benefits — an average of $831/month for new retirees in 2026, or up to $1,306/month if contributing at maximum levels for 39 years.

4. Employment Insurance (EI)

EI premiums in 2026 are 1.66% of insurable earnings, to a maximum insurable amount of $63,200 — resulting in a maximum annual employee premium of $1,049.12. EI entitles you to 55% of your average insurable weekly earnings (up to $668/week maximum) for up to 45 weeks if you lose your job without cause, plus maternity/parental leave benefits (55%–33% of earnings for up to 52 weeks shared between parents).

Deductions That Reduce Taxable Income

Your gross income is not necessarily your "taxable income." Several deductions reduce the income on which you're taxed:

• RRSP contributions: Dollar-for-dollar reduction in taxable income, up to 18% of prior year earned income (max $31,560 in 2026)
• Employer pension contributions: Defined benefit/contribution plan contributions reduce taxable income
• Union dues: Fully deductible from income
• Childcare expenses: Up to $8,000/child under 7, $5,000/child 7–16
• Moving expenses: If moving 40km+ closer to new workplace
• Home office expenses (T2200): If required to work from home by employer

An RRSP contribution of $15,000 on a $90,000 Ontario salary reduces taxable income from $90,000 to $75,000, saving approximately $4,485 in combined federal/provincial tax — an immediate 29.9% return on the contribution.

FAQ

What percentage of my salary goes to taxes in Canada?

At $60,000 in Ontario: approximately 23–25% total (federal + provincial + CPP/EI). At $100,000 in Ontario: approximately 33%. At $150,000 in Ontario: approximately 40%. Alberta is 8–12 percentage points lower at any income level due to no provincial tax.

Does my employer deduct all taxes automatically?

Yes — employers are required to withhold income taxes, CPP, and EI at source and remit them to the CRA. Your T4 slip at year-end shows all amounts withheld. If your employer over- or under-withholds (common for multiple jobs, freelance income, or commission), you settle the difference through your annual tax return.

What is the difference between marginal and effective tax rate?

The marginal rate is the rate on your last dollar earned (relevant for evaluating a raise or extra income). The effective rate is the average rate across all your income (what you actually pay as a percentage of gross). An Ontario worker earning $90,000 faces a 43.41% marginal combined rate on their top dollars, but only pays an effective combined rate of approximately 29.5% on total income.