What Is Net Income? (Canadian Guide)

“Net income” means two different things in Canada. On a pay stub it is take-home pay: gross pay minus income tax, CPP or QPP contributions, EI premiums and any other deductions. On a tax return it is line 23600: total income minus certain deductions such as RRSP contributions, before any income tax. The tables below estimate take-home pay by salary and province.

It is part of our guide to average and median income in Canada. Statistics Canada’s “after-tax income”, used on the average household income and median household income pages, is a third measure: total income minus income tax, without taking off CPP or EI. Average and median salaries before any deductions are on the average salary in Canada page.

Gross Income vs Net Income

What Gets Deducted from Your Paycheque

Mandatory Deductions

Optional/Employer Deductions

These depend on the employer and the plan, so amounts vary.

How to Read Your Pay Stub

Net Income by Salary Level (Ontario, 2026)

Estimated using 2026 federal and Ontario tax brackets, 2026 CPP/CPP2/EI rates, and the non-refundable credits every employee gets: the federal and Ontario basic personal amounts, the Canada employment amount, and credits for base CPP contributions and EI premiums (the enhanced CPP portion is deducted from income instead). The Ontario column includes the Ontario surtax, the Ontario tax reduction, the Low-income Individuals and Families Tax (LIFT) credit and the Ontario Health Premium. It is annual tax as assessed on the return. Assumes a single filer with employment income only and no other deductions or credits. Actual payroll withholding can differ slightly from the tax owed at filing. Use the income tax calculator for a personalized figure.

Net Income by Province ($70,000 Salary, 2026)

Estimated with the same method as the Ontario table above: each province’s 2026 brackets and basic personal amount, the 2026 federal brackets, basic personal amount and Canada employment amount, and 2026 CPP/EI rates (plus the BC and New Brunswick low-income tax reductions, which are zero at this income), for a single filer with employment income only. Ontario’s figure includes its $600 health premium. Alberta also has no provincial sales tax. For comparison at a higher income, provincial income tax on $150,000 is $11,470 in Alberta, $11,552 in BC and $14,608 in Ontario. Quebec’s figure uses Quebec’s own system: QPP at 6.3% instead of CPP, the reduced Quebec EI rate plus Quebec Parental Insurance Plan premiums, the Quebec basic personal amount and deduction for workers, and the 16.5% federal abatement. “Total deductions” for Quebec include QPIP premiums.

Net income calculation example (Ontario, $70,000 salary, 2026)

Estimated using 2026 federal and Ontario tax brackets, 2026 CPP/EI rates, the federal and Ontario basic personal amounts, the Canada employment amount, and CPP/EI credits (see the method note under the salary table above), and the Ontario surtax where it applies.

Take-home is about 77% of gross salary at this income level in Ontario. The percentage differs by province, as the table above shows; the income tax calculator computes it for any income.

Net Income for Tax Purposes (Line 23600)

CRA “net income” on your tax return (line 23600) is different from your paycheque net income:

Other deductions that reduce CRA net income:

• Carrying charges and interest expenses
• Deductible spousal support payments you made
• Other specific deductions

The northern residents deduction comes later: it is subtracted from net income to get taxable income.

This CRA net income figure is important because it determines:

• Canada Child Benefit (CCB): reduced as family net income rises
• Canada Groceries and Essentials Benefit (formerly the GST/HST credit): reduced as family net income rises
• OAS clawback: applies when net income exceeds $93,454 (2025 income, for the July 2026 to June 2027 payment period)
• Certain provincial benefits

Gross vs. net income for mortgage qualification

When you apply for a mortgage, your lender uses gross income, not take-home pay, in the GDS and TDS ratio calculations:

Example: On a $90,000 gross salary, the GDS limit is $90,000 × 39% ÷ 12 = $2,925/month for all housing costs combined (mortgage, property tax, heating and half of any condo fees). These are the limits for insured mortgages; lenders set their own for uninsured ones.

Because the ratios use gross income, two people with the same salary qualify for about the same mortgage whether they live in a higher-tax or lower-tax province, even though their take-home pay differs. Take-home pay is what actually covers the payments.

What counts as income

Canada’s tax system doesn’t treat every dollar of income the same way. Where the money comes from decides which slip or form reports it, whether tax is taken off before you receive it, and how much of it counts as taxable income. For how much Canadians earn, by province, profession and percentile, see the income section.

Gross, net and taxable income

Gross income is what you earn before anything is taken off. “Net income” means two different things: take-home pay on a pay stub, and line 23600 of a tax return, which the CRA uses to calculate your non-refundable tax credits and benefits such as the Canada child benefit. How tax brackets work covers the rates applied to taxable income.

Employment income

Wages, salary, commissions and taxable benefits are employment income. Your employer deducts income tax, CPP contributions (QPP in Quebec) and EI premiums from your pay and reports what it paid you for the calendar year on a T4 slip. Your employer contributes an amount equal to the CPP contributions it deducts.

• What comes off each paycheque: how payroll deductions work, or work out take-home pay with the salary after tax calculator.
• Perks that count as pay: what a taxable benefit is.
• Reading the slip: the T4 slip explained.

Self-employment income

If you work for yourself, you report your business or professional income and expenses on Form T2125, and tax applies to the profit rather than to your sales. You pay both the employee and the employer share, calculated on Schedule 8 when you file your income tax return. Self-employed people can register for EI special benefits (maternity, parental, sickness and caregiving), but must wait 12 months after registering before they can claim.

Self-employment income has no tax withheld, so the CRA notes you might have to pay tax by instalments; tax instalments covers who has to pay and when.

• Whether the CRA sees you as an employee or a contractor: contractor vs employee.
• A side business on top of a job: side hustle taxes and the side hustles section.
• Full-time self-employment: the self-employed tax guides.

Investment income

Investment income is taxed in three different ways, depending on its type:

• Interest from savings accounts, GICs and bonds forms part of your total income and is reported on line 12100, usually from a T5 slip. See how GIC interest is taxed.
• Dividends from taxable Canadian corporations can qualify for the federal dividend tax credit, which works differently for eligible and non-eligible dividends: see the dividend tax credit guide.
• Capital gains are only partly taxed: 50% of the gain is added to your income, the share set by the capital gains inclusion rate. Gains and losses are worked out on Schedule 3.

Dividends, capital gains and interest compared works out the tax on each at different incomes. The account matters too: Interest, dividends and capital gains earned in a TFSA are generally tax-free, even when you withdraw them. Income earned in an RRSP is usually exempt from tax as long as the funds remain in the plan, and you generally pay tax when you receive payments from it. The TFSA and RRSP guides cover how each account works.

Rental income

Rent from a property you own is reported on Form T776, Statement of Real Estate Rentals (how to fill it in), where you work out your gross rental income, the expenses you can deduct and your net rental income or loss for the year. How rental income is taxed covers what you can deduct and how losses work.

Government benefits and pensions

Some government payments are taxable income and some aren’t:

• Taxable: the CPP retirement pension, the OAS pension, which also carries a recovery tax at higher incomes, and EI benefits, whatever the type of benefit. Tax is deducted from each EI payment; for CPP and OAS, you can ask Service Canada to deduct it.
• Not taxable: the Guaranteed Income Supplement, which is recalculated each July from your net income for the previous calendar year, and the Canada child benefit.

The government benefits guide lists the federal programs.

The kinds of income side by side

Frequently asked questions

What is the difference between net income and take-home pay? Net income (Line 23600 on your T1) is your total income minus certain deductions (RRSP contributions, union dues, childcare, etc.), used for calculating eligibility for income-tested benefits and credits. Take-home pay is what actually deposits in your bank account after all payroll deductions (taxes, CPP, EI). They are different numbers: net income does not subtract income taxes owed; take-home pay does.

Related Resources

• Salary Calculator
• Average Salary in Canada
• Minimum Wage in Canada
• Income Tax Guide
• How Much Should You Save Each Month?