Guide · Tax year 2026

How CPP works

The Canada Pension Plan takes a fixed share of your earnings between a floor and a ceiling, and then a second, smaller share above that ceiling. What it does to your income tax is less obvious, because the contribution is split in two and the halves are treated differently.

The floor, the rate and the two ceilings

The first $3,500 you earn in a year is exempt. Above that, 5.95% is deducted on earnings up to the maximum pensionable earnings for the year, which for 2026 is $74,600. The largest first-tier contribution is therefore (74,600 minus 3,500) times 5.95%, or $4,230.45.

A second contribution, usually called CPP2, applies above that ceiling. It takes 4% of earnings between $74,600 and the additional maximum pensionable earnings for the year of $85,000. The band is $10,400 wide, so CPP2 maxes out at $416.00. Above $85,000 of salary no further pension contribution is taken at all, at any income.

Your employer pays the same amounts again on your behalf. Neither the employer share nor your own is a tax, and neither is capped by anything except those two ceilings. Contributions run from age 18 to age 70, and this site assumes a full contributory year: someone who turned 18 in June, retired in March, or filed an election to stop contributing after 65 will see less than the table below.

Contributions at different salaries

Why the contribution is split in two

The 5.95% first-tier rate is really two rates stacked on each other. 4.95% is the base contribution, which has existed in something like its present form for decades. The remaining 1.00%, and the whole of CPP2, is the enhanced contribution introduced from 2019 to pay a larger pension later. How much larger depends on how many years you contribute under the enhanced rules, which is a question about your future benefit and not something this site models.

The two slices are treated differently for tax, and this is the part almost every quick calculation gets wrong:

• The base slice earns a non-refundable tax credit, valued at the lowest rate, 14% federally. A credit is worth the same to everyone who claims it, whatever their bracket.
• The enhanced slice, plus all of CPP2, is a deduction. It comes off income before tax is calculated, so it is worth your marginal rate, which is higher than the credit rate for anyone above the first bracket.

At a $120,000 salary the enhanced slice is $1,127.00, so tax is calculated on that much less than the salary. Collapsing the split and treating the whole contribution as one thing produces an answer that is wrong in one direction on the credit and the other direction on the deduction.

Quebec residents contribute to the Quebec Pension Plan instead, at 6.30% rather than 5.95%, with the same ceilings and the same base and enhanced split. Quebec grants no provincial credit for the base slice, which is a real cost and not a rounding difference. The Quebec page works through it.

What CPP does to your marginal rate

Below the first ceiling, an extra dollar of salary costs 5.95% in pension contributions on top of income tax. Between the ceilings it costs 4%. Above the second ceiling it costs nothing. Measured on the engine in Alberta, the total bite on the next $100 of salary is 34.3% at $60,000, 33.3% at $80,000 and 30.5% at $95,000, even though the income tax bracket is climbing across that range rather than falling.

This is the reason a raise or a bonus that carries you past $85,000 keeps more of itself than the same raise lower down. It is worked through in how bonuses are taxed.

What the calculator assumes

It assumes employment income for a full contributory year, one employer, and no election to stop contributing. It works annually rather than per pay period, so it does not prorate the $3,500 exemption across twenty-six pay cheques the way a payroll system does. That difference is cents, not dollars, and it is set out on the methodology page. Self-employment income, where you pay both the employee and the employer share, is out of scope.

Related

• How EI works
• The full calculation
• Reading your pay statement
• Salary after tax calculator
• Bonus calculator
• All guides

Sources

1. CPP contribution rates, maximums and exemptions, 2026 · Canada Revenue Agency · checked August 18, 2026
2. Contributions to the Québec Pension Plan (QPP), 2026 · Retraite Québec · checked August 18, 2026
3. Current year tax rates and income brackets (2026) · Canada Revenue Agency · checked August 18, 2026

Reviewed 2026-08-18