Updated Checked by the Tax-Services.ca editorial team How we check
Tax deducted at source means your employer takes income tax, CPP and EI out of each paycheque and sends it to the Canada Revenue Agency for you. On a $60,000 salary in Ontario, the year’s full-year tax comes to $8,320.50 and payroll contributions add $4,339.75. (We’re assuming you mean the Canadian version. The same phrase means something different in other countries.)
What comes off your paycheque at source?
The CRA’s employer guide says employers must withhold CPP contributions, EI premiums and income tax from pay, including taxable benefits and allowances. So it’s three separate things going by one name. Nobody asks you for permission and nothing gets skipped because you forgot about it.
Your employer decides how much income tax to hold back from the tax credits you list on Form TD1, the personal tax credits return you fill in when you start a job. Put down the wrong credits and the withholding is wrong from day one. That’s not a penalty, only a timing problem: you’ll settle up when you file.
How much does tax at source come to on a $60,000 salary?
Here are the year-end figures from the payroll deductions calculator and the income tax calculator for a single Ontario employee with no other income.
| Item | Amount for the year |
|---|---|
| Income tax (federal plus Ontario) | $8,320.50 |
| CPP | $3,361.75 |
| EI | $978.00 |
| Total taken at source | $12,660.25 |
| Left over | $47,339.75 |
The income tax line is the tax owed on the final return, not the amount your employer withholds week to week. Payroll systems spread an estimate across the pay periods, so the total on your T4 can land a little above or below it. The gap becomes your refund or your balance owing.
Want to see it from the other side? The take-home pay calculator starts from gross pay and shows what reaches your account.
Put in everyday terms, that’s about 21 cents of every dollar of gross pay gone before it reaches you, and a take-home of roughly $910 a week. Most people never see the full-year figure, because it’s chopped into small bites on each stub.
How do you read the deductions on a pay stub?
Look for three lines: income tax, CPP and EI. Next to each there’s usually a year-to-date column, and that’s the one worth watching. By the last paycheque in December, the year-to-date income tax should be close to the amount that later shows in box 22 of your T4. If a line is missing or looks too small, say so early, because fixing it in March is a lot more awkward than in June.
Where do you see what was taken?
On your T4. Employers have to file their information returns by the last day of February for the previous year, and box 22 shows the income tax deducted. Check that figure against the sum of your pay stubs before you file. If your last stub of the year shows a year-to-date total that doesn’t match box 22, ask payroll.
Type that box into your return exactly as printed. It’s the number that tells the CRA how much you’ve already paid.
Why do some people still owe tax in April?
Because the source deduction only covers the pay it sees. Extra income that has no withholding, like freelance work on the side or rent, doesn’t get taxed in advance. A bonus is the usual surprise, and the bonus tax calculator shows what one really leaves you with once the year is settled.
If you owe more than $3,000 for the year ($1,800 in Quebec) and also did in one of the two years before, the CRA expects instalments. The due dates are March 15, June 15, September 15 and December 15. The tax instalments calculator splits a year’s estimate into four equal payments. (The CRA also lets you choose other methods, which the tool doesn’t cover.)
Another reason to owe: a second job. Each employer works from your TD1, and neither one sees the other’s pay. We couldn’t confirm from the CRA guide how it treats two jobs at once, so read the TD1 instructions before you fill in a second form.
Picture Sam in Moncton, who picks up weekend shifts at a second employer and thinks the withholding has everything covered. It doesn’t. The second payroll treats that pay as if it were the only pay, so tax time brings a bill. Setting aside a few bucks from each cheque is a cheap fix.
Mistakes and limits
The figures above assume one job, one province and no deductions. Add an RRSP contribution or child care costs and the year’s tax drops, but the tax withheld on your stubs may not change until you file. If large, regular deductions leave you overpaying all year, you can ask the CRA about lowering withholding, though we didn’t find the exact process on a CRA page, so we won’t describe it here.
The calculators use 2026 rates, so a stub built on an older payroll table can differ from them.
Our sources
The employer rules come from the CRA‘s Employers’ Guide, Payroll Deductions and Remittances (T4001). The instalment rules and dates are on the CRA’s instalments pages. The dollar figures are from this site’s calculators, which use 2026 CPP, EI and tax data. No government body has reviewed or endorsed what you read here.
Frequently asked questions
Who deducts tax at source in Canada?
Your employer does. The CRA's employer guide says they must withhold CPP, EI and income tax from pay and remit it.
Where do I see the tax deducted?
Box 22 of your T4 shows income tax deducted. Employers file these slips by the last day of February.
Does source deduction mean I won't owe anything at filing?
No. It's an estimate. You settle the exact amount on your return, and income with no withholding can leave a balance.
What is Form TD1?
The personal tax credits return you give your employer. It tells them which credits to use when working out withholding.
When do instalments replace tax at source?
When you owe more than $3,000 ($1,800 in Quebec) for the year and in one of the two years before, the CRA may require instalments.
- 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