Methodology - Canada (2026)

Educational model - not CRA payroll tables, not a Notice of Assessment, not tax advice.

Employee (T4)

Federal tax 2026 (2.0% indexation): 14% to $58,523, 20.5% to $117,045, 26% to $181,440, 29% to $258,482, 33% above.
Federal Basic Personal Amount 2026: $16,452 (base $14,829 + additional $1,623); the additional amount is phased out between $181,440 and $258,482 of net income.
Provincial tax for the selected province. Ontario default: 5.05% / 9.15% / 11.16% / 12.16% / 13.16%, BPA $12,989, plus the Ontario surtax (20% of provincial tax over $5,818, +36% over $7,446) and the Ontario Health Premium (up to $900 by taxable income). British Columbia and Alberta are also modelled (no surtax or health premium).
CPP 2026: 5.95% on pensionable earnings between the $3,500 basic exemption and the YMPE $74,600 (max $4,230.45). CPP2: 4.00% on earnings from the YMPE to the YAMPE $85,000 (max $416.00).
EI 2026: 1.63% on insurable earnings up to the maximum $68,900 (max $1,123.07). Employer EI = 1.4x the employee rate (shown in employer cost).
Credits: the base CPP (4.95 of 5.95 points) and EI give non-refundable credits at the lowest federal/provincial rate; the enhanced CPP (1% of base + all CPP2) is deducted from taxable income.
Out of scope: RRSP/FHSA deductions, dividend and capital-gains treatment, spousal/dependant credits, the Canada Employment Amount, Quebec (QPP/QPIP/abatement) and the territories.

Net business income = revenue - expenses; federal and provincial income tax at the same rates as for an employee.
CPP: the self-employed person pays both halves - base 11.90% (2x 5.95%) up to the YMPE, and CPP2 8.00% (2x 4.00%) from the YMPE to the YAMPE.
EI is optional for the self-employed (special-benefits opt-in); off by default in this model.
Out of scope: GST/HST, capital cost allowance (CCA), home-office and vehicle apportionment, instalment interest, Quebec.