How paycheck calculations work
Tax year: 2026 Last updated: September 5, 2026 Methodology Based on 2026 Canadian payroll tax rates and contribution rules.
paycheque.app estimates Canadian employment take-home pay from a salary, a province or territory, and a pay frequency. It is a calculator, not an employer payroll system and not a CRA or Revenu Québec service.
The tax rules that are used
Rates live in versioned files under resources/tax/2026/. The calculation engine reads those files. Updating 2027 should mean adding a new folder and switching CURRENT_TAX_YEAR, not rewriting the calculator.
Current edition: CRA T4127 123rd edition (July 1, 2026) with January 1, 2026 baseline.
Federal and provincial income tax
The engine follows CRA T4127 Option 1 for a full-year employee with constant pay and claim code 1 (basic personal amount only). Federal tax uses the published brackets, Canada Employment Amount, and the BPAF phase-out for higher incomes. Provincial or territorial tax uses that jurisdiction’s brackets and credits, including Ontario’s health premium and surtax, the BC tax reduction, Alberta’s K5P credit, and Yukon’s K4P credit where those rules apply.
Quebec is not treated as a regular province
CRA does not calculate Quebec provincial tax in T4127 (factor T2 is zero). Quebec income tax uses Revenu Québec brackets and the provincial basic personal amount. Quebec employees contribute to QPP instead of CPP, pay QPIP, pay a lower EI rate, and receive a 16.5% federal abatement.
CPP and QPP
Pension contributions are calculated on annual pensionable earnings with the basic exemption, YMPE/MPE, and YAMPE. Additional CPP/QPP and CPP2/QPP2 reduce taxable income (CRA factor F5). Once the annual maximum is reached, further contributions stop.
Employment Insurance
EI uses the annual maximum insurable earnings and the employee rate for the employee’s province. Quebec uses the reduced EI rate because QPIP exists separately.
Pay frequency
Annual tax and contribution totals are estimated first. Monthly divides by 12, semimonthly by 24, biweekly by 26, and weekly by 52. The annual totals stay the same; only the per-cheque display changes. A live payroll system may allocate the CPP exemption per period and stop CPP or EI mid-year, so an individual cheque can differ by a few dollars.
Why an employer paycheque can differ
- Different TD1 / provincial claim codes, extra amounts, or multiple jobs
- Taxable benefits, allowances, or commissions
- Employer pension, union dues, or additional tax requested
- Hired part-way through the year
- Prescribed-zone / northern residents amounts
- Employer software rounding or a different T4127 option
Where the data comes from
- Payroll Deductions Formulas – 123rd Edition Effective July 1, 2026 (T4127) — July 2026 federal and provincial rates, constants, BC/NL/PE mid-year changes
- Payroll Deductions Formulas – 122nd Edition Effective January 1, 2026 (T4127) — Option 1 formulas (A, T3, T1, T4, T2, T), BPAF/BPAMB/BPAYT, CPP/QPP/EI/QPIP formulas, Ontario health premium and tax reduction, Alberta K5P, Yukon K4P
- T4032-OC Payroll Deductions Tables – CPP, EI, and income tax deductions – In Canada beyond the limits of any province/territory or outside Canada (January 1, 2026) — 2026 federal brackets, Canada Employment Amount, federal BPA min/max, CPP YMPE/YAMPE, EI MIE, worked examples
- CPP contribution rates, maximums and exemptions — 2026 YMPE $74,600, basic exemption $3,500, employee rate 5.95%, maximum $4,230.45
- T4127 – Current year (landing page) — Confirms the July 1, 2026 formulas guide is the current T4127 edition
- TD1 2026 Personal Tax Credits Return — Federal basic personal amount $16,452 and income-based partial claim guidance
- Income Tax Rates (2026 taxation year) — Quebec 2026 personal income tax brackets
- Parameters of the Personal Income Tax System for 2026 — Quebec 2026 basic personal amount $18,952 and workers deduction $1,450
Overtime pay calculator
Gross overtime uses jurisdiction rules stored in resources/employment/overtime.php: the standard weekly threshold, a daily threshold where the statute has one, and the overtime multiplier. Hours you enter as overtime are paid at that premium. Regular hours stay at the regular wage.
After-tax overtime is not overtime pay times an assumed tax rate. The calculator annualizes the pay period (weekly × 52, biweekly × 26, and so on), then compares the payroll engine with and without the overtime. The difference is the estimated amount you keep. Occupations, averaging agreements, and federally regulated workplaces can follow different employment-standards rules.
Bonus tax calculator
A bonus is treated as extra employment income. The engine runs twice — on salary alone, then on salary plus bonus. Net bonus is the difference in annual take-home. CPP/QPP, CPP2/QPP2, EI, and QPIP only increase if you are still below those annual ceilings. Employer withholding on the bonus cheque can differ from this annual estimate.
Raise calculator
The raise calculator compares payroll results on the current salary and the new salary. Net raise is new take-home minus old take-home. Monthly, biweekly, and weekly extras divide that annual difference by 12, 26, and 52. You can also enter a raise percentage; the new salary is calculated first, then the same comparison runs.
Canadian Armed Forces salary calculator
CAF base pay is read from versioned files under resources/military/2025/. The official National Defence Regular Force monthly tables and Reserve Force Class A/B daily tables are still published as effective 1 April 2025. Those are the current published rank scales used here. April 2026 CAF compensation changes were mainly allowances (environmental, domestic operations, and similar), which this calculator does not estimate.
Take-home pay uses the same 2026 federal/provincial tax, CPP/QPP, CPP2/QPP2, EI, and QPIP engine as the paycheck calculator. Regular Force pension is estimated from Treasury Board rates effective 1 January 2026: 9.10% up to the YMPE of $74,600 and 11.69% above it. Members with 35 years of pensionable service are not modeled. Reserve Force pension is omitted because 2026 Reserve plan rates are not published on that same table.
Actual CAF pay can differ because of occupation group, specialist pay, Class of reserve service, allowances, and individual pensionable service. Allowances and benefits are not included unless the user types an amount.
When tax data is updated
Federal and most provincial amounts change in January. CRA sometimes publishes a July T4127 for mid-year provincial changes. This site records the retrieved date with the rule set. The 2026 files were last checked on September 5, 2026.