Get ready, starting from next month, your net income will decrease due to increased taxes!
The treatment of the Canada Pension Plan (CPP) on the personal income tax return has changed since 2019. This means that, in the case of a regular maximum contribution of $3,867.50, $631.00 will be deductible on the T1 (rather than being a tax credit). This amount reflects the annual increase that began in 2019, so the 4.95% rate from 2018 still applies as a credit, and the excess is deductible.
Furthermore, starting in 2024, there is a “CPP2” rate of 4% applied to income above the maximum earnings and below the CPP2 maximum earnings – effectively an additional 4% on that $6,600 gap. The CPP2 contributions by an employee are deductible rather than being a credit – so someone with earnings over $73,200 will contribute $4,055.50, of which a total of $838.00 will be deductible.
2024 CPP Contributions:
- 2024 CPP1 max earnings – $68,5002024 CPP2 max earnings – $73,200Exemption – $3,500Max contribution – $3,867.50 CPP1, $4,055.50 CPP2 includedCPP Rate – 5.95% on CPP1; 4.00% on CPP2; employer’s portion matches dollar for dollar
2024 EI Contributions:
- Max earnings – $63,200Max contribution – $1,049.12EI Rate – 1.66%Employer’s portion – 1.4 times employee portion