CPP Tax: 2026 Rates, CPP2 Tier, and Contribution Rules

CPP contributions are the payroll deductions that fund your future Canada Pension Plan retirement, disability, and survivor benefits. In 2026, employees and employers each pay 5.95 percent on earnings between $3,500 and $74,600, and a second tier adds 4 percent on earnings up to $85,000. Self-employed workers pay both halves. You get some of the cost back at tax time through a non-refundable credit, and self-employed filers also get a deduction for the employer-equivalent share.¹

2026 Rates and Earnings Limits

The Canada Revenue Agency updates the thresholds each year. For 2026, the Year’s Maximum Pensionable Earnings (YMPE) is $74,600. After subtracting the $3,500 basic exemption, maximum contributory earnings come to $71,100.¹

The base contribution rate is 5.95 percent for both the employee and the employer. That figure includes the original base rate plus a 1 percent first additional contribution phased in under the CPP enhancement.² At the maximum, each side pays $4,230.45 for the year. Self-employed workers pay both shares at a combined 11.9 percent, up to $8,460.90.¹

The CPP2 Second Tier for Higher Earners

A second layer of contributions began in 2024. CPP2 applies to earnings between the YMPE and a second ceiling, the Year’s Additional Maximum Pensionable Earnings (YAMPE). In 2026 the YAMPE is $85,000.³

The CPP2 rate is 4 percent each for employee and employer, or 8 percent for the self-employed. The maximum CPP2 amount in 2026 is $416 per employee (matched by the employer) and $832 if you’re self-employed. There is no basic exemption at this tier: the 4 percent rate applies to the first dollar earned above $74,600.³

Someone earning $85,000 or more pays into both tiers. Someone earning $70,000 pays only base CPP. The extra cost is real, but the trade-off is a larger pension later.

Who Has to Contribute

Almost every worker in Canada outside Quebec contributes to CPP starting at age 18, provided they earn more than $3,500 in the year. That includes salaried employees, hourly workers, and the self-employed.⁴ Quebec workers pay into the Quebec Pension Plan instead, run by Retraite Québec under similar rules.⁵

Contributions are mandatory from 18 through 65. Between 65 and 70, workers already receiving a CPP retirement pension can elect to stop. At 70, contributions end regardless of whether you’re still working.⁴

How the Deduction Is Calculated

For employees, the employer does the math on each paycheque. It starts with gross pensionable earnings for the pay period, subtracts a prorated share of the $3,500 annual exemption, and applies 5.95 percent to what’s left. On a biweekly schedule (26 pay periods), the per-period exemption works out to about $134.62. The employer withholds your share and remits an equal amount of its own to the CRA.¹

Once your year-to-date earnings reach $74,600, base CPP deductions stop. If your pay keeps going, CPP2 deductions take over until you hit $85,000. Most employees never track any of this by hand because payroll software does it.

If You’re Self-Employed

Self-employed contributors calculate and pay CPP with their annual income tax return, using Schedule 8, “Canada Pension Plan Contributions and Overpayment.”⁶ The steps:

Subtract the $3,500 basic exemption from net self-employment income.
Apply 11.9 percent to the result, up to $71,100 in contributory earnings (maximum base CPP of $8,460.90).
If net income exceeds $74,600, apply 8 percent to the portion between $74,600 and $85,000 (maximum CPP2 of $832).

The total is added to the tax balance owing. Because nothing was withheld during the year, self-employed filers often see a large bill in April. Quarterly instalment payments help avoid interest charges.

How CPP Contributions Affect Your Taxes

Contributions cost you money, but they also cut your tax bill. The mechanism depends on whether you’re an employee or self-employed.

Employees claim their CPP contributions as a non-refundable tax credit. The credit is calculated at the lowest federal rate (15 percent), so it reduces the tax you owe rather than your taxable income. Both base CPP and CPP2 amounts qualify.

Self-employed workers get a split treatment. You deduct the employer-equivalent half of your CPP contributions from net income, which reduces taxable income directly. You then claim the employee-equivalent half as a non-refundable credit. That mirrors what happens when an employer and employee each handle their own share.

What Happens If You Overpay

If you worked for more than one employer in the year, each one withholds CPP based only on what it paid you. Your combined contributions can end up above the annual maximum. The CRA identifies the overpayment when you file and applies the excess as a credit. Employees get their overcontribution back; employers do not receive a refund of their share.⁷

Stopping Contributions Between 65 and 70

If you’re between 65 and 70, still working, and already collecting a CPP retirement pension, you can elect to stop contributing. Employees complete Form CPT30, “Election to Stop Contributing to the Canada Pension Plan,” and give a copy to the employer.⁸ Self-employed contributors file the election with the CRA along with their tax return.

The election takes effect on the first day of the month after your employer receives the completed form, not the day you sign it.⁹ If you change your mind, the same form is used to revoke the earlier election, and the same timing rule applies.

Before opting out, weigh what you’d give up. Each year you keep contributing while receiving a retirement pension earns a Post-Retirement Benefit (PRB) that is added to your monthly pension the following January. The maximum PRB for 2026 is $54.69 per month for a 65-year-old who contributed at the maximum level the prior year, and the amount is prorated for lower earnings.¹⁰ For someone in good health who plans to keep working, continued contributions usually pay off. Opting out makes more sense if the cash flow is needed now or health concerns shorten the expected benefit period.

If You Work Across the Canada-US Border

CPP and US Social Security are coordinated by a totalization agreement, which prevents double contributions and lets credits earned in one country count toward eligibility in the other.¹¹

A Canadian employer that temporarily sends you to the United States can generally keep you on CPP instead of switching you to FICA for up to five years. You request a certificate of coverage by filing Form CPT56 with the CRA, and your US employer keeps it on file. The reverse works for an American worker posted to Canada.¹¹

US Social Security ordinarily requires 40 quarters (10 years) of credits to qualify for a retirement benefit. If your career was split between the two countries, the agreement lets you combine CPP and Social Security credits to meet either country’s eligibility threshold. The benefit from each country is then prorated based on how long you actually contributed there.¹¹

1
Canada Revenue Agency. CPP Contribution Rates, Maximums and Exemptions
2
Government of Canada. Canada Pension Plan Enhancement
3
Canada Revenue Agency. Second Additional CPP Contribution (CPP2) Rates and Maximums
4
Canada.ca. Contributions to the Canada Pension Plan
5
Retraite Québec. Québec Pension Plan
6
Canada Revenue Agency. 5000-S8 Schedule 8 – Canada Pension Plan Contributions and Overpayment
7
Canada Revenue Agency. About the Deduction of Canada Pension Plan (CPP) Contribution
8
Canada Revenue Agency. CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election
9
Canada Revenue Agency. CPT30 Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election
10
Government of Canada. Canada Pension Plan Post-Retirement Benefit (PRB) How Much Could You Receive
11
Social Security Administration. Totalization Agreement with Canada