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.
Common Ontario Raise Scenarios
$2,500 Raise
A smaller raise like this often means just a modest bump on each paycheque. You might notice it more in your annual total than week to week.
$5,000 Raise
This is where the difference starts to feel real. You'll see it on each pay, and over a full year it adds up to something meaningful for day-to-day finances.
$10,000 Raise
A raise this size usually makes a noticeable shift in your take-home. Not all of it lands in your pocket — taxes and deductions take their share — but the increase is easier to feel in everyday spending.
$15,000 Raise
At this level the change can reshape your monthly budget. A bigger chunk goes to deductions, but what's left over still represents a real step up in what you take home.
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 |