CPP vs EI vs income tax: where each paycheck dollar goes in 2026
Four lines come off most paychecks in Canada outside Quebec: federal income tax, provincial income tax, CPP and EI. They work differently. Income tax rises with income and has no maximum. CPP and EI are contributions with a ceiling, so they stop partway through the year for higher earners. This guide follows one paycheck dollar at $50,000 and $90,000 a year in Ontario, shows when each line stops, and explains what changed on July 1, 2026 in the payroll formulas.
All figures come from the same code as the pay calculator, which follows the CRA T4127 Payroll Deductions Formulas (July 2026 edition). The values and their sources are on the Sources and rates page. They are for a resident of Ontario in one job who claims only the basic personal amounts.
1. Where each dollar goes
The table gives the yearly amount of each line and the share of pay it takes.
| Ontario | $50,000: amount | $50,000: share of pay | $90,000: amount | $90,000: share of pay |
|---|---|---|---|---|
| Federal income tax | $3,985 | 8% | $11,252 | 12.5% |
| Ontario tax, surtax and Health Premium | $2,288 | 4.6% | $5,781 | 6.4% |
| CPP | $2,767 | 5.5% | $4,230 | 4.7% |
| CPP2 | $0 | 0% | $416 | 0.5% |
| EI | $815 | 1.6% | $1,123 | 1.2% |
| Take-home pay | $40,145 | 80.3% | $67,197 | 74.7% |
At $50,000 CPP takes 5.5% of pay and EI takes 1.6%. At $90,000 CPP, CPP2 and EI have all hit their yearly maximum, so together they take a smaller share than they would if the rates applied to every dollar, while the two income tax lines take a larger one.
2. How CPP, CPP2 and EI work
- CPP: 5.95% of pay between $3,500 and $74,600 a year, so the maximum is $4,230.45. Of that rate, 4.95% is the base contribution and 1% is the enhanced part.
- CPP2: 4% of pay between $74,600 and $85,000, for a maximum of $416.00.
- EI: 1.63% of pay up to $68,900, for a maximum of $1,123.07.
The 1% enhanced CPP part and all of CPP2 are deducted from income before income tax is worked out. The base CPP part and EI instead earn a tax credit at the lowest federal and provincial rates.
3. When each line stops
Payroll stops taking a contribution when the yearly maximum is reached. This is the order for a biweekly employee in Ontario, from the calculator's year-long simulation:
| Biweekly paychecks, Ontario | $50,000 | $90,000 |
|---|---|---|
| CPP is taken up to paycheck number | 26 | 22 |
| CPP2 is taken from paycheck number | never | 22 |
| EI is taken up to paycheck number | 26 | 20 |
| Take-home, paycheck 1 | $1,544.03 | $2,549.06 |
| Take-home, paycheck 26 | $1,544.03 | $2,793.57 |
At $50,000 no maximum is reached during the year, so every paycheck is the same. At $90,000, EI stops after paycheck 20 and CPP after paycheck 22. CPP2 runs from paycheck 22 to paycheck 25, and the last paychecks of the year have no CPP, CPP2 or EI at all. That is why the last paychecks of the year are larger than the first.
4. One paycheck at $90,000, start to finish
A biweekly paycheck at $90,000 is $3,461.54 before deductions. The first one has $434.82 of federal tax, $223.29 of Ontario tax, $197.95 of CPP and $56.42 of EI, which leaves $2,549.06. Paycheck 22 is the changeover. CPP takes only $73.50, the amount that brings the year to its maximum, and CPP2 starts with $62.16. By paycheck 26 the deductions are federal and Ontario tax only, and the take-home pay is $2,793.57.
The maximums can be checked by hand. CPP is 5.95% of $71,100, which is $4,230.45. CPP2 is 4% of $10,400, which is $416.00. EI is 1.63% of $68,900, which is $1,123.07.
5. What an extra $1,000 is worth
Marginal tax is the share of the next dollar that is taken. It is not the same as the average share, and it changes with income.
| Ontario | Extra pay | Kept after deductions | Share kept |
|---|---|---|---|
| $50,000 | $1,000 | $748.15 | 74.8% |
| $90,000 | $1,000 | $703.50 | 70.4% |
At $50,000 the extra $1,000 is hit by federal tax, Ontario tax, the Ontario Health Premium, CPP and EI. At $90,000 EI, CPP and CPP2 are already at their maximums, so only federal and Ontario income tax take a share.
6. What changed on July 1, 2026
CRA publishes T4127 twice a year. The 122nd edition applies to pay dates from January 1 to June 30, 2026, and the 123rd edition applies from July 1. The provincial constants differ between the two editions only for British Columbia, Newfoundland and Labrador and Prince Edward Island, adjusted for the second half of the year. The calculator lets you choose which edition applies to the first paycheck.
| First biweekly paycheck | Provincial tax before July 1 | Provincial tax from July 1 | Change in take-home |
|---|---|---|---|
| British Columbia, $50,000 | $64.62 | $78.41 | -$13.79 |
| Ontario, $50,000 | $88.01 | $88.01 | $0.00 |
| British Columbia, $90,000 | $178.07 | $191.57 | -$13.50 |
| Ontario, $90,000 | $223.29 | $223.29 | $0.00 |
Ontario does not change, so the Ontario rows are identical. In British Columbia, the first biweekly paycheck on the July formulas has higher provincial tax than one on the January formulas. The employee's tax for the year is settled when the tax return is filed.
7. How to use this
- If your pay stub shows CPP or EI that suddenly stops late in the year, that is the yearly maximum, not an error.
- If your take-home pay jumps in the last paychecks of the year, the same thing is the cause.
- Each employer applies the maximums on its own, so a person with two jobs in the year can pay more than the maximum in total. Any excess is dealt with when the tax return is filed.
- Use the calculator with your own pay frequency to see the paycheck-by-paycheck result for your province.
8. What is not included
- Tax credits beyond the basic personal amounts, RRSP deductions and other income.
- Bonuses, retroactive pay and commissions, which are taxed with separate formulas.
- Employer-paid contributions, which are not deducted from your pay.
- CPP in 2027: T4127 announces a lower base rate from January 1, 2027, which is not used here.
This guide is general information, not tax advice. Your pay stub and your tax return are the authority. For a decision that matters, check it with the CRA or a tax professional.
Work out your own take-home paySources
- CRA: T4127 Payroll Deductions Formulas, 123rd edition (July 1, 2026)
- CRA: T4127 Payroll Deductions Formulas, 122nd edition (January 1, 2026)
- CRA: T4127 Table 8.3, CPP contribution rates, maximums and exemptions (2026)
- CRA: T4127 Table 8.7, EI premium rate and maximums (2026)
- Every rate used, with its source and check date: Sources and rates
This calculator is general information, not tax, legal or financial advice. It uses the CRA and Ontario pages listed on the Sources page, and your pay stub, employment contract or tax return may differ. Rates as at November 1, 2026.