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Contractor tax comes down to one surprise: you pay both halves of CPP. On $80,000 of net business income in Ontario, a contractor pays $22,126.47 in income tax and CPP, or 27.7%. An employee on $80,000 pays $19,697.38, including EI. That’s $2,429.09 more for the contractor, and most of it is CPP.
Are you a contractor or an employee?
The label in your contract doesn’t settle it. The CRA looks at how the work is really done, and outside Quebec it weighs six things: who controls how and when the work happens, whose tools and equipment are used, if you can send someone else in your place, who carries the financial risk, how much you’ve invested in the business, and if you can make or lose money depending on how it goes.
Say you work set hours on the payer’s premises, on the payer’s laptop, and can’t send a substitute. That looks like employment, whatever the invoice says. Quebec applies civil law and asks mostly about subordination. If you’re unsure, the CRA lets you ask for a ruling on CPP and EI using form CPT1. Its page gives a deadline of June 29 of the year after the year the question relates to.
Why does it matter? Because an employee’s pay has CPP and EI taken off by the payer. A self-employed person generally doesn’t pay EI (some choose to opt in for special benefits) and pays CPP on both sides.
What $80,000 looks like as a contractor and as an employee
Both columns use Ontario and 2026 rates. The contractor figure is net business income, meaning after business expenses. The table leaves out GST/HST, which a contractor may have to collect and send in, and EI, which the self-employed tool doesn’t model.
| Item | Employee, $80,000 pay | Contractor, $80,000 net income |
|---|---|---|
| Federal income tax | $9,242.60 | $8,698.44 |
| Ontario income tax | $4,885.26 | $4,535.12 |
| CPP | $4,446.45 | $8,892.90 |
| EI | $1,123.07 | Not included |
| Total taken | $19,697.38 | $22,126.47 |
| Left over | $60,302.63 | $57,873.53 |
Look at the income tax lines first. The contractor pays less income tax, since part of the CPP counts as a deduction. Then look at CPP, where the contractor’s bill is twice as large. You can rerun both columns in the take-home pay calculator and the self-employed tax calculator.
Why the CPP bill is so big
For 2026 the CRA gives a maximum pensionable earnings figure of $74,600, a basic exemption of $3,500 and a rate of 5.95% on each side. A self-employed person pays both sides, so the base CPP tops out at $8,460.90. Earnings above $74,600 and up to $85,000 face a second rate of 8% for the self-employed. That’s why the $80,000 example shows $8,892.90.
It isn’t all lost money. CPP buys you a pension later, and half of the base amount is a tax deduction. Still, it stings.
Does a contractor pay more overall?
On these numbers, yes, unless the fee is higher. A contractor who wants the same take-home as an employee needs to charge more than the employee’s pay would be, because there’s no paid vacation, no employer CPP share and no employer EI. Work out your rate from the after-tax figure you need, then add your expenses. The net to gross pay calculator runs the sum backwards from the amount you want to keep.
Mistakes and limits
- Plugging gross invoices into a tax tool. Use net business income, after costs you can actually support with receipts.
- Forgetting that a T4 job and a side contract can be added together. Put the second income in the “other taxable income” field.
- Skipping instalments. If your tax owing is over $3,000, the CRA may expect quarterly payments, and the tax instalments calculator shows the dates.
- Treating the results as a return. The tool doesn’t include EI, GST/HST or credits beyond the basics, so your actual figure will differ.
Where the numbers come from
Classification factors and the CPT1 rule are from the Canada Revenue Agency guide on employee or self-employed status. CPP figures are from CRA contribution tables for 2026. Tax figures use 2026 federal and Ontario schedules built into this site’s calculators. This site has no link with the CRA or any government.
Frequently asked questions
How much tax does a contractor pay on $80,000 in Ontario?
About $22,126.47 in income tax and CPP, or 27.7% of net business income, before GST/HST and before any EI opt-in.
How does the CRA decide if I am a contractor or an employee?
Outside Quebec it looks at control, tools, subcontracting, financial risk, investment and chance of profit. Quebec looks mainly at subordination.
Do contractors pay EI?
Generally no. Some self-employed people opt in to EI special benefits.
Why is contractor CPP twice as high?
A self-employed person pays the employee and employer halves. For 2026 the base maximum is $8,460.90.
Can I ask the CRA to rule on my status?
Yes, with form CPT1. The CRA page gives a deadline of June 29 of the year after the year the question relates to.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.