Gross Income vs Net Income
| Term | Definition | Example ($70,000 salary in Ontario) |
|---|---|---|
| Gross income | Total salary/wages before deductions | $70,000 |
| Net income (take-home) | What you receive after all deductions | ~$53,786 |
| CRA line 23600 net income | Gross income minus specific tax deductions (RRSP, union dues, childcare) | Varies |
| Taxable income | Net income minus further deductions (such as loss carry-forwards or the northern residents deduction); tax rates apply to this amount, and personal amounts are then claimed as credits | Varies |
What Gets Deducted from Your Paycheque
Mandatory Deductions
| Deduction | 2026 Rate | Maximum Annual | Purpose |
|---|---|---|---|
| CPP (Canada Pension Plan) | 5.95% of pensionable earnings ($3,500–$74,600, the 2026 YMPE) | $4,230.45 | Retirement pension |
| CPP2 (second ceiling) | 4% on earnings $74,600–$85,000 (2026 YAMPE) | $416 | Enhanced retirement pension |
| EI (Employment Insurance) | 1.63% of insurable earnings up to $68,900 (2026 MIE) | $1,123.07 | Unemployment, parental leave |
| Federal income tax | 14–33% (progressive brackets) | Varies | Federal government services |
| Provincial income tax | 4–25.75% (varies by province and territory) | Varies | Provincial government services |
Optional/Employer Deductions
| Deduction | Typical Amount | Notes |
|---|---|---|
| Employer pension (DB or DC) | 3–9% of salary | Matched by employer |
| Group RRSP | Varies | May include employer match |
| Health/dental benefits | $50–200/month | Employer-sponsored plan |
| Union dues | 1–3% of salary | If unionized |
| Parking / transit | Varies | If applicable |
| Life insurance / disability | Varies | Employer-sponsored |
Net Income by Salary Level (Ontario, 2026)
| Gross Annual Salary | Federal Tax | Ontario Tax (incl. health premium) | CPP | EI | Annual Net | Take-Home % |
|---|---|---|---|---|---|---|
| $40,000 | $2,691 | $1,153 | $2,172 | $652 | $33,332 | 83.3% |
| $50,000 | $3,985 | $2,265 | $2,767 | $815 | $40,168 | 80.3% |
| $60,000 | $5,338 | $2,982 | $3,362 | $978 | $47,340 | 78.9% |
| $70,000 | $7,278 | $3,856 | $3,957 | $1,123 | $53,786 | 76.8% |
| $80,000 | $9,243 | $4,885 | $4,446 | $1,123 | $60,303 | 75.4% |
| $100,000 | $13,302 | $6,723 (incl. surtax) | $4,646 | $1,123 | $74,206 | 74.2% |
| $120,000 | $17,502 | $9,386 (incl. surtax) | $4,646 | $1,123 | $87,343 | 72.8% |
| $150,000 | $25,302 | $14,608 (incl. surtax) | $4,646 | $1,123 | $104,320 | 69.5% |
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)
| Province | Provincial Tax Bracket Rates | Estimated Annual Net | Total Deductions (tax + CPP/QPP + EI) |
|---|---|---|---|
| British Columbia | 5.6–20.5% | $54,348 | 22.4% |
| Alberta | 8–15% | $54,107 | 22.7% |
| Ontario | 5.05–13.16% (before surtax) | $53,786 | 23.2% |
| Saskatchewan | 10.5–14.5% | $52,669 | 24.8% |
| New Brunswick | 9.4–19.5% | $52,042 | 25.7% |
| Manitoba | 10.8–17.4% | $51,899 | 25.9% |
| Quebec | 14–25.75% | $51,045 | 27.1% |
| Nova Scotia | 8.79–21% | $50,496 | 27.9% |
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.
How to Read Your Pay Stub
| Line | What It Shows | Where It Goes |
|---|---|---|
| Gross pay | Total earnings this period | Starting point |
| Federal tax | Income tax withheld for CRA | Federal government |
| Provincial tax | Income tax withheld for province | Provincial government |
| CPP/QPP | Pension contribution | Your future CPP pension |
| EI | Employment insurance premium | EI fund |
| Other deductions | Benefits, pension, union, etc. | Various |
| Net pay | What hits your bank account | Your account |
| YTD earnings | Cumulative gross pay this year | Reference |
| YTD deductions | Cumulative deductions this year | Reference |
Net Income for Tax Purposes (Line 23600)
CRA “net income” on your tax return (line 23600) is different from your paycheque net income:
| What Reduces CRA Net Income | Example |
|---|---|
| RRSP contributions | Deduct contributions from gross income |
| Union/professional dues | Deduct from gross income |
| Childcare expenses | Deduct eligible amounts |
| Moving expenses (for work/school) | Deduct if you moved 40+ km closer |
| Employment expenses (if eligible) | Home office, vehicle, supplies |
CRA net income affects eligibility for benefits like CCB, GST/HST credit, and OAS clawback.
Net income calculation example (Ontario, $70,000 salary, 2026)
| Item | Amount |
|---|---|
| Gross salary | $70,000 |
| Federal income tax | −$7,278 |
| Ontario provincial tax (incl. $600 health premium) | −$3,856 |
| CPP contributions | −$3,957 |
| EI premiums | −$1,123 |
| After-tax take-home | ~$53,786 |
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). No Ontario surtax applies at this income.
Take-home is approximately 77% of gross salary at this income level in Ontario. The percentage varies by province; use the income tax calculator to compare your take-home pay across provinces at your specific income level, since provincial tax brackets and rates differ significantly.
The “Net Income” Confusion on Your Tax Return
This is where many Canadians get confused: CRA’s definition of “net income” (line 23600 of your tax return) is not the same as your take-home pay.
CRA net income = Gross income − specific CRA deductions:
- RRSP contributions
- Union dues
- Childcare expenses
- 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:
| Ratio | What It Measures | Limit |
|---|---|---|
| GDS (Gross Debt Service) | Housing costs ÷ gross income | ≤ 39% |
| TDS (Total Debt Service) | All debt payments ÷ gross income | ≤ 44% |
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.
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
Sources
The figures and rules on this page come from these sources, last checked against them between September 5, 2026 and September 29, 2026. How we check facts.
- Canada Revenue Agency: Line 21900 moving expenses
- Canada Revenue Agency: Cpp contribution rates maximums exemptions
- Canada Revenue Agency: Second additional cpp contribution rates maximums
- Canada Revenue Agency: Ei premium rates maximums
- Canada Revenue Agency: Current year
- Canada Revenue Agency: T4127 jul payroll deductions formulas
- CMHC: Calculating GDS / TDS
- CMHC: CMHC Purchase
- CMHC: Home Start
- CMHC: CMHC Improvement
- Department of Finance Canada: Technical backgrounder mortgage insurance rules income proposals revised october 14 2016
- Department of Finance Canada: Government announces boldest mortgage reforms in decades to unlock homeownership for more canadians
17 more sources
- Department of Finance Canada: Straight switches and portfolio insurance
- Department of Finance Canada: Boldest mortgage reforms in decades come into force today
- Financial Consumer Agency of Canada: Down payment
- Financial Consumer Agency of Canada: Buying home
- Government of British Columbia: Minimum wage
- Government of Canada: Current and Forthcoming General Minimum Wage Rates in Canada
- Government of Canada: Payments
- Government of Canada: Recovery tax
- Government of Manitoba: Province of Manitoba | finance - Homeowners Affordability Tax Credit
- Government of Saskatchewan: Protecting Jobs and Increasing Workers' Wages | News and Media
- OSFI: Minimum qualifying rate for uninsured mortgages
- OSFI: Final Revised Guideline B-20: Residential Mortgage Underwriting Practices and Procedures
- OSFI: Amendments to the minimum qualifying rate for uninsured mortgages
- OSFI: OSFI exempts uninsured mortgage straight switches from the prescribed MQR and…
- OSFI: Loan-to-income limits for uninsured mortgage portfolios
- Revenu Québec: Income tax rates
- Statistics Canada: Data table