Quick answer
In Canada in 2026, a raise is taxed at your marginal rate, not your average rate, and CPP and EI come off it too until you reach their yearly maximums, so you keep only part of it. For a $5,000 raise on a $70,000 salary in Ontario, net pay rises by $3,139.56 a year, 62.8% of the raise, after income tax and CPP.
How this calculator works
This calculator runs your current salary and your salary after the raise through the exact same federal-and-provincial tax engine as our Take-Home Pay Calculator — CRA's T4127 payroll formulas applied to the whole year, and Revenu Québec's TP-1015.F-V formula in Quebec — once each, then reports the difference. Enter your province, your current annual salary, and the raise itself as either a flat dollar amount or a percentage of your current salary; a percentage is converted to a dollar figure using the salary you entered, then run through the tax engine exactly like a dollar raise would be. The headline number is your net increase — how much more you actually keep per year — and the table breaks gross and net pay, before and after the raise, into yearly, monthly and two-week figures.
Marginal keep-rate on the raise = Net increase ÷ Gross increase
Why a raise is taxed at the margin, not the average
Your average tax rate is your total tax divided by your whole income — a blend of every bracket you've passed through, including the tax-free basic personal amount at the bottom. Your marginal tax rate is the rate on your next dollar, and a raise is made entirely of next dollars: it sits on top of the income you already earn, so it's taxed starting from wherever your current salary leaves off, not from your average rate. That's why a raise that looks modest in dollar terms can still lose 25%, 30%, sometimes more than 40% of itself to federal and provincial tax plus CPP/QPP and EI/QPIP combined (and, in the Northwest Territories and Nunavut, a 2% payroll tax) — the marginal rate on those dollars is simply higher than the average rate your whole paycheque implies.
The ceiling effect: CPP, CPP2 and EI
CPP, EI and their Quebec equivalents aren't ordinary taxes — they're contributions that stop, or drop to a lower rate, once your income for the year passes a fixed dollar ceiling. In 2026, the CPP (or QPP) contribution runs at a total of 5.95% (6.30% for QPP), made up of T4127's base rate of 4.95% (5.30% for QPP) and its first additional rate of 1%, up to a $74,600 ceiling called the Year's Maximum Pensionable Earnings; above it, only the newer CPP2/QPP2 layer applies, at 4%, up to a second $85,000 ceiling, beyond which no CPP/QPP is deducted at all. EI runs at 1.63% (1.30% in Quebec, which also has its own 0.43% QPIP premium) up to a $68,900 ceiling, above which EI stops entirely. A raise that happens to push your salary across one of these ceilings keeps a noticeably larger share of itself, above the ceiling, than an identical raise that stays below it — not because the raise is treated specially, but because part of it simply stops paying a contribution that the rest of your income still pays. Nothing on a pay stub calls this out; it only shows up when you compare two raises side by side, which is what the second worked example below does.
One deduction has no ceiling at all. The payroll tax of the Northwest Territories and Nunavut is 2% of every dollar of gross pay, so it takes the same 2% of a raise at any salary, and a raise there keeps 2 percentage points less of itself than it would without that tax. An RRSP contribution does not reduce it.
Negotiating in gross terms
Compensation conversations happen in gross numbers — an employer offering "5%" or "$5,000 more" is talking about your salary before any of this comes off. It's worth knowing the net figure for your own budgeting, but negotiating in net terms tends to confuse the conversation, since your employer has no visibility into your personal tax situation, RRSP room or provincial credits. The more useful move is converting between the two forms in your own head: a percentage raise is worth more in dollars the higher your current salary already is, so if you're comparing offers or past raises, translate everything to a dollar figure first. This calculator's percentage mode does exactly that conversion, and its net-increase figure tells you what that gross number is actually worth to you once tax and contributions are through with it.
Worked example — $70,000 in Ontario, a $5,000 raise
Current salary $70,000, a flat $5,000 raise, Ontario — this calculator's own defaults.
- Before: gross $70,000.00, federal tax $7,278.19, Ontario tax $3,855.73, CPP $3,956.75, EI $1,123.07 — net $53,786.27.
- After: gross $75,000.00, federal tax $8,258.60, Ontario tax $4,446.06, CPP $4,246.45 (including $16.00 of CPP2, since $75,000 is just past the $74,600 ceiling), EI $1,123.07 (already at its cap both before and after) — net $56,925.83.
- Net increase: $3,139.56 a year — $261.63 a month, $120.75 every two weeks — a 62.8% marginal keep-rate on the $5,000 raise itself, well below the 76.8% share of the original $70,000 kept overall.
Worked example — crossing the CPP ceiling
Two identical $3,600 raises in Alberta (no provincial surtax or health premium to complicate the comparison), both starting above the $68,900 EI ceiling and both taxed in the same 30.5% federal-plus-provincial marginal bracket the whole way through — the only difference is whether the raise crosses the $74,600 CPP ceiling:
- Below the ceiling: $70,000 → $73,600. Net increase $2,337.98 — a 64.9% keep-rate.
- Crossing the ceiling: $72,000 → $75,600. Net increase $2,355.74 — a 65.4% keep-rate, even though both raises are the same size and the same income-tax bracket applies throughout.
The $17.76 gap is the CPP ceiling effect from the section above: the last $1,000 of the second raise (from $74,600 to $75,600) pays CPP2 at 4% instead of the 5.95% total CPP rate, and CPP2 is deducted from taxable income rather than credited at the lowest rate, so that slice keeps about $18 more than the equivalent slice of the first raise. It's a real, if modest, jump — this calculator's edge note flags it whenever your own raise crosses one of the 2026 ceilings. (Both raises start above the $68,900 EI ceiling on purpose: a baseline that still paid EI would have widened the gap to over $60, most of it EI rather than CPP.)
FAQ
Why is a raise taxed at a higher rate than my regular pay?
It isn't taxed at a special higher rate — a raise is simply added on top of the income you already earn, so it lands in whatever tax bracket comes next. Canada's federal and provincial brackets are progressive, meaning only the income inside a given bracket is taxed at that bracket's rate. If your current salary already fills the lower brackets, the raise itself is taxed starting from your current marginal rate — which is almost always higher than your average rate across your whole income, since your average blends in all the lower-taxed dollars you earned first.
What is the CPP/EI "ceiling effect" and why does it matter for a raise?
CPP, CPP2 and EI (or QPP, QPP2, EI and QPIP in Quebec) all stop, or drop to a lower rate, once your income passes a fixed dollar ceiling for the year — $74,600 for the CPP/QPP contribution (base plus first additional), $85,000 for CPP2/QPP2, and $68,900 for EI (2026 figures; Quebec's QPIP has its own $103,000 ceiling). If a raise pushes your salary past one of these ceilings, the portion of the raise above the ceiling keeps a noticeably larger share after deductions than the portion below it, because that slice stops paying the contribution — or drops to a lower one — entirely. Most pay stubs never explain this, so a raise that happens to cross a ceiling can net out better than a same-sized raise that doesn't.
Should I negotiate a raise as a dollar amount or a percentage?
Either works for this calculator, but they aren't the same thing over time: a percentage raise compounds on whatever you already earn, so the same 5% is worth more in dollars to someone already earning $100,000 than to someone earning $50,000, while a flat dollar raise is worth the same to both. Employers often think and budget in percentage terms, so knowing the equivalent dollar figure — and the gross number your offer needs to hit before tax and deductions take their share — puts you on the same footing in the conversation.
Why does my raise end up smaller after tax than I expected?
Because take-home pay only shows part of the picture on a raise: federal and provincial income tax both take a bigger share at the margin than your average rate suggests, and CPP (or QPP) and EI (or QPIP in Quebec) come off as well unless you're already past their ceilings for the year, and in the Northwest Territories and Nunavut a 2% payroll tax comes off every dollar. A $5,000 raise rarely arrives as $5,000 more in your pocket — this calculator shows the actual net increase, per year, per month and per two weeks, using the same federal and provincial tax engine as our Take-Home Pay Calculator.
Will a raise ever leave me worse off by pushing me into a higher tax bracket?
No — moving into a higher bracket only ever raises the tax rate on the income inside that new bracket, never on the income you were already earning below it. A larger paycheque always means more take-home pay in Canada's tax system; what changes is only the rate on the newest dollars, not the whole amount. This calculator's per-year, per-month and per-two-week table always shows a positive net increase for any positive raise, for exactly this reason. It counts tax and payroll deductions on pay only, not benefits that depend on your income.
This page is general information based on published 2026 federal and provincial payroll formulas, not tax or financial advice. Your own return, and your employer's actual payroll calculation, may differ — talk to a licensed accountant about your specific situation.