Updated Checked by the Tax-Services.ca editorial team How we check
Income tax withholding is the amount your employer takes off each pay cheque and sends to the CRA on your behalf. It’s a running estimate of your yearly tax, not the final bill. On $60,000 a year in BC, about $304 comes off every two weeks for income tax, plus $129.30 for CPP and $37.62 for EI.
How does an employer decide what to withhold?
Two things drive it: your pay and what you tell them on Form TD1. Everyone fills out the federal TD1. If you claim more than the basic personal amount, you also fill out the provincial one, such as the TD1ON for Ontario. Your employer adds up the credits, finds the matching tax in the CRA’s payroll tables (or the online calculator) and takes that amount from each pay. The CRA’s TD1 personal tax credits returns page links to the current forms, including the 2026 ones for pay received on or after January 1, 2026.
Without a TD1, the employer is limited to the basic personal amount. You may end up with more withheld than you need, and the difference comes back when you file.
Employers keep the form on file and don’t send it to the CRA. Quebec has its own system, run by Revenu Quebec, so the rest of this page is about the other provinces and the territories.
Which deductions come off my pay cheque?
Income tax isn’t the only one. CPP and EI come off the same cheque, and each stops once you hit the yearly maximum. These are the 2026 figures outside Quebec.
| Deduction | 2026 rate | Applies to | Yearly maximum |
|---|---|---|---|
| CPP | 5.95% | Pay from $3,500 to $74,600 | $4,230.45 |
| CPP2 | 4% | Pay from $74,600 to $85,000 | $416 |
| EI | 1.63% | Pay up to $68,900 | $1,123.07 |
So higher earners see their take-home rise late in the year. Once CPP and EI have reached their limits, more of each dollar reaches you. If you start a new job midway through the year, your new employer starts the CPP and EI count from zero, so you can end up overpaying and get the extra back when you file.
What does $60,000 look like in BC?
We ran a $60,000 salary through our payroll deductions calculator for BC, paid every two weeks. Each cheque is $2,307.69 before deductions. Federal tax takes $205.32, BC tax $98.75, CPP $129.30 and EI $37.62. You keep $1,836.71, or about $47,755 over the year.
The same numbers in one place are on the take-home pay calculator. Real stubs can differ by a few dollars, because payroll software works in steps through the year.
Why is withholding different from the tax I owe?
Because it’s a guess made one cheque at a time, using only what your employer knows about you on that day, which is your pay and your TD1. Your real tax is set when you file, and it counts things payroll doesn’t know about, like an RRSP contribution you make on your own or a second job. If too much was withheld you get a refund. If too little, you owe.
BC shows how it can go wrong even when nobody makes a mistake. The lowest BC rate is 5.60% for 2026, but employers used 5.06% for the first half of the year. From the first payroll in July, the CRA’s tables use a prorated 6.14%, so the year averages out. Same person, same pay, and the withholding jumps in July.
Should you ask for more to be taken off? Only if you’d rather have a refund than a bigger paycheque, and that’s a choice about habit more than money, because a refund is just your own money that sat with the government all year. Otherwise, leave it alone.
Can you change how much is withheld?
Sometimes. If you know you’ll claim a big deduction, such as regular RRSP contributions or child care costs, the CRA has a request form (T1213) that lets it approve lower withholding so you don’t wait for a refund. It needs the CRA’s approval before your employer can use it, and it isn’t instant. Going the other way, you can simply give your employer a written request to take extra tax off each pay, which is handy if you have a second job with nothing withheld.
Two jobs at once is a classic trap. Each employer assumes its job is your only one and applies the basic personal amount, so combined withholding can fall short and you owe in April.
Common mistakes with tax withholding
The big one is forgetting to update your TD1. Employers need a new one within 7 days of a change that could alter your credits, like a new dependant. Another is a side income with nothing withheld. Freelance pay, for instance, has no employer to take tax off, and the tax instalments calculator is worth a look then.
Bonuses cause surprise too. They land on your top rate, and the bonus tax calculator shows what’s left. Working backwards from the pay you want? The net to gross calculator does that.
How the figures were checked
The CPP and EI rates and maximums come from the CRA‘s 2026 payroll pages. The TD1 rules and the BC July note are from the CRA’s payroll and TD1 pages, and the examples are from our own calculators. No government body has reviewed or endorsed what you read here.
Frequently asked questions
What is income tax withholding?
It's the tax your employer takes from each pay and sends to the CRA for you. It counts toward your bill for the year, which is settled when you file.
What happens if I don't give my employer a TD1?
The CRA says deductions are then limited to the basic personal amount, so you may have more withheld than needed.
How soon must a new TD1 be handed in?
Employers must get one when you start, and within 7 days of a change that could alter your personal tax credits.
Why did my BC withholding go up in July?
The lowest BC rate rose to 5.60% for the whole year. The CRA's tables used 5.06% until June, then a prorated 6.14% from the first July payroll.
When do CPP and EI stop coming off my pay?
When you reach the yearly maximums, $4,230.45 for CPP and $1,123.07 for EI in 2026. CPP2 adds up to $416 for pay above $74,600.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill