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A $120,000 salary in Ontario leaves $87,343 a year after tax, CPP and EI, which is $7,279 a month. A self-employed person with $120,000 of net business income keeps $85,226, or $2,117 less. Most of the gap is CPP: the self-employed pay both halves ($9,293), while the employee pays $4,646.
How much does a self-employed person keep on $120,000 in Ontario?
About $85,226, or $7,102 a month, as of October 2026. “Net business income” here means what is left after business expenses. The table sets it beside a salary of the same size, line by line.
| Line (2026, Ontario) | Employee | Self-employed |
|---|---|---|
| Income before tax | $120,000 | $120,000 |
| Federal income tax | $17,502 | $16,816 |
| Ontario income tax and health premium | $9,386 | $8,665 |
| CPP | $4,646 | $9,293 |
| EI | $1,123 | $0 |
| Take-home per year | $87,343 | $85,226 |
| Take-home per month | $7,279 | $7,102 |
These are estimates with basic credits only. Neither column includes benefits, RRSP room or other income.
Why does self-employment cost more in CPP, and does the tax side make up for it?
It makes up for part of it. An employee pays 5.95% CPP on earnings between $3,500 and $74,600, plus 4% on the slice up to $85,000, and the employer pays the same amount again. A self-employed person pays both halves, which is $9,293 at this income against $4,646 for the employee. You can deduct the employer-equivalent part, $5,773, from income, so taxable income falls to $114,227 and income tax drops to $25,482 from $26,888. The Canada Revenue Agency: CPP contribution rates, maximums and exemptions lists the 2026 limits.
EI works differently. Self-employed people don’t pay premiums, and they aren’t covered for regular benefits, unless they sign up for the special benefits program described by Service Canada: EI for self-employed workers. That saves $1,123 a year. It also means no EI cheque if the work dries up.
What would a self-employed person need to earn to match the employee?
To take home the same $87,343, you need about $123,467 of net business income, which is $3,467 more than the salary. The salary also understates what the job costs, because the employer pays $4,646 of CPP and $1,572 of EI on top. Add those and the employer’s cost is $126,219. A contractor billing that amount (net of expenses) would keep $88,900, which is $1,557 more than the employee.
In practice a contractor also pays for what an employer usually covers: insurance, paid time off, equipment and slow weeks. The comparison shows only the tax and CPP part.
What does a self-employed year look like with real invoices?
Picture a freelance designer in Ottawa who invoices $138,000 in 2026 and spends $18,000 on software, insurance, a shared studio and a laptop. Net business income is $120,000, so the table above applies: $85,226 left for her, or 62% of what clients paid. The other money went to the CRA and the Canada Pension Plan ($34,774) and to the business itself ($18,000).
Her cash flow is lumpier than a salary. Clients pay in 30 or 60 days, and nobody withholds anything, so a sensible habit is to move about 29% of each payment into a separate account the day it lands. When the April bill comes, the money is already there.
How does the gap change at other incomes?
It narrows as income rises, because CPP stops growing at the maximum while the deduction is worth more at higher rates. This is the same comparison at four levels (estimates, Ontario, 2026).
| Salary or net business income | Employee take-home | Self-employed take-home | Employee ahead by |
|---|---|---|---|
| $100,000 | $74,206 | $71,662 | $2,544 |
| $110,000 | $81,032 | $78,562 | $2,470 |
| $120,000 | $87,343 | $85,226 | $2,117 |
| $130,000 | $93,002 | $91,040 | $1,962 |
Which federal bracket are you in?
The federal rate steps from 20.5% to 26% at taxable income of $117,045 (Canada Revenue Agency: 2026 tax rates and income brackets). The employee’s taxable income is $118,873, which is $1,828 over that line. The self-employed person’s is $114,227, $2,818 under it, because the CPP deduction is larger. An extra $1,000 of business income adds $379 of tax, against $434 on a salary.
What could change these numbers?
An RRSP contribution of $10,000 cuts the tax for both, but unevenly. The employee saves $3,689 and ends at $81,032 of take-home after the deposit. The self-employed person saves $3,336 and ends at $78,562. The 2026 RRSP limit is $33,810 and the 2027 limit is $35,390 (Canada Revenue Agency: RRSP limits). Business expenses you haven’t counted lower the self-employed tax, other income raises both, and moving provinces changes the provincial line only. Incorporating changes the picture again, and the salary versus dividends calculator is the place to start.
When is the tax actually paid?
The employee never sees it, because the employer withholds it from each cheque. The self-employed person has to set it aside. At this income that is $34,774 a year for tax and CPP, or $2,898 a month, about 29% of every dollar earned. The 2026 return is due on 15 June 2027, but any balance owing is due on 30 April 2027. The tax installments calculator shows how quarterly payments work.
For another pay level, see $130,000 after tax in Ontario. The self-employed tax calculator and the tax brackets by year and province cover the rest.
Where does this information come from?
Rules come from the Canada Revenue Agency (CPP rates and maximums, 2026 federal brackets, RRSP limits) and Service Canada (EI for self-employed workers); every take-home figure is an estimate from this site’s 2026 payroll and income-tax engine. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Is it better to be an employee or self-employed at $120,000?
On tax and CPP alone the employee keeps $2,117 more at the same figure, and the self-employed person needs about $123,467 to match. The better choice depends on benefits, job security and expenses, which this estimate leaves out.
Does a self-employed person pay EI?
Not unless they register for the special benefits program. Without it they pay no EI premium, which saves $1,123 a year at this income, but they also can't collect regular EI benefits if they lose the work.
What is CPP2 and does it apply at $120,000?
CPP2 is the second CPP tier, charged at 4% on earnings between $74,600 and $85,000. It tops out at $416 for an employee and $832 for a self-employed person, and both reach that maximum at $120,000.
How much should a self-employed person set aside each month?
At $120,000 of net business income, about $2,898 a month covers Ontario and federal tax plus both halves of CPP. That is roughly 29% of income. Your own figure depends on deductions and credits, so treat it as a starting point.
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- Ontario income tax and sales tax in 2026
How Ontario income tax works in 2026: the five brackets, the surtax and health premium, the 13% HST, and the calculators that switch to Ontario