Why your raise feels smaller than expected
The number on your offer letter is a gross amount. Your bank account receives the net. Between those two numbers sit federal income tax, Ontario provincial income tax, CPP contributions, and EI premiums — each of which takes a slice of every dollar you earn.
The critical point: your raise is not taxed at your blended effective rate. It is taxed at your marginal rate — the rate that applies to the highest slice of your income. If a $7,000 raise pushes income from $110,000 to $117,000 in Ontario, that $7,000 sits in the 43.4% combined marginal bracket (federal 26% + Ontario 11.16% + Ontario surtax).
The 2026 rate change that helps you
For 2026, the federal bottom tax rate dropped from 14.5% (2025) to 14% — the first reduction to the federal bottom bracket since 2016. If your raise keeps you below $58,523, you benefit from this change.
When CPP and EI stop being deducted
CPP contributions stop once your earnings hit $74,600 (2026 YMPE). CPP2 contributions stop at $85,000 (YAMPE). EI premiums stop at $68,900. If your current salary already exceeds these thresholds, your raise will not trigger additional CPP or EI deductions.
Example: $75,000 → $85,000 raise in Ontario
| Item | Current ($75K) | New ($85K) | On raise |
|---|---|---|---|
| Gross salary | $75,000 | $85,000 | +$10,000 |
| Federal income tax | $8,854 | $10,904 | −$2,050 |
| Ontario income tax | $4,247 | $5,164 | −$917 |
| CPP / CPP2 | $4,246 | $4,646 | −$400 |
| EI premium | $1,123 | $1,123 | $0 (maxed) |
| Net income | $56,530 | $63,163 | +$6,633 |
Alex keeps approximately $6,633 of a $10,000 gross raise — about $553/month. Effective deduction rate on the raise: 33.7%. Use the calculator above for your exact numbers.
2026 rates used in this calculator
| Component | Rate / Amount | Source |
|---|---|---|
| Federal bottom bracket | 14% | CRA T4032 |
| Federal BPA | $16,452 | CRA |
| Ontario bottom bracket | 5.05% | Ontario MOF |
| Ontario BPA | $12,989 | Ontario MOF |
| Ontario surtax threshold 1 | $5,818 (20%) | Ontario MOF |
| Ontario surtax threshold 2 | $7,446 (+36%) | Ontario MOF |
| CPP employee rate | 5.95% to $74,600 YMPE | ESDC |
| CPP2 employee rate | 4.00% to $85,000 YAMPE | ESDC |
| EI employee rate | 1.63% to $68,900 | ESDC |
Frequently asked questions
Why is my raise smaller than expected after taxes?
Because raises are taxed at your marginal rate, not your blended average rate. Every dollar of your raise sits on top of your existing income, where the highest brackets apply first. In Ontario, a raise that crosses from $90,000 to $100,000 lands in a combined marginal bracket above 43%.
What is the effective deduction rate on a raise?
It is the total percentage of your gross raise consumed by taxes and deductions: 1 − (net raise ÷ gross raise). This is not the same as your blended effective tax rate on all income. It isolates the marginal impact on the raise amount only.
Does CPP or EI affect my raise calculation?
Only if your salary is below the ceiling. CPP applies on earnings between $3,500 and $74,600 (2026 YMPE). CPP2 applies between $74,600 and $85,000. EI premiums apply on earnings up to $68,900. If your current salary already exceeds these ceilings, additional CPP or EI will not be deducted from your raise.
Is this calculator accurate for 2026?
Yes. It uses 2026 CRA federal brackets (14% bottom rate), 2026 Ontario provincial brackets, 2026 Ontario surtax thresholds ($5,818 and $7,446), and 2026 ESDC CPP/EI rates. Sources: CRA T4032-ON January 2026, Ontario Ministry of Finance 2026.
My employer quoted me a raise in monthly terms. How do I use this?
Multiply the monthly amount by 12 to get the annual gross. For example, a "$500/month raise" is approximately $6,000/year gross. Enter your current annual salary and add $6,000 for the new salary field.
Can I reduce the tax impact of a raise?
Yes — the most effective tool is an RRSP contribution. RRSP deductions reduce your taxable income, which can lower the amount of your raise subject to higher brackets. Contributing the raise amount to an RRSP defers the tax entirely until withdrawal.
What does this calculator not model?
RRSP, TFSA, FHSA, or pension deductions; the Ontario Health Premium (up to $900/year); other non-refundable credits (childcare, disability, tuition, union dues); Quebec parental insurance (QPIP). This calculator is Ontario-specific only.
What is the Ontario surtax and does it affect my raise?
The Ontario surtax is an additional tax on top of Ontario provincial tax — applied when your Ontario tax payable exceeds $5,818 (20% surtax) or $7,446 (additional 36% = 56% total). This typically affects incomes above $94,000–$100,000. If your raise pushes Ontario tax above these thresholds, the effective rate on your raise increases significantly.
Related Ontario & Canadian calculators
All tools in the Calc-HQ.ca network use 2026 CRA and ESDC rates. Jurisdiction-specific. No account required.
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