The Canada Pension Plan has been undergoing a staged enhancement since 2019, designed to raise retirement benefits from roughly a quarter to about a third of pensionable earnings. The final piece arrived in 2024: a second contribution, on a second band of earnings, at a different rate. It is called CPP2, and if you earn above the standard CPP ceiling it is coming out of your pay.
How the two bands work
Base CPP applies to earnings between the basic exemption and the year’s maximum pensionable earnings. CPP2 applies to earnings between that ceiling and a second, higher ceiling.
- Base CPP 2026: 5.95% on earnings from $3,500 up to $74,600 — a maximum of $4,230.45.
- CPP2 2026: 4.00% on earnings from $74,600 up to $85,000 — a maximum of $416.00.
- Combined maximum employee contribution: $4,646.45.
Earnings above $85,000 attract no further CPP. Employers match both contributions, so a business pays the same amounts again for each employee at the ceiling.
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The amounts are smaller than the change in the rules suggests. Someone earning $75,000 pays 4% of $400 — sixteen dollars for the year. Someone at $80,000 pays $216. Only earners at or above $85,000 pay the full $416, or about $16 per bi-weekly pay period.
It is worth being clear that this is not a tax increase in the ordinary sense. CPP contributions buy a larger CPP pension, and CPP2 contributions build additional retirement benefit. Whether that is a good trade depends on your circumstances, but it is a forced saving rather than a levy.
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CPP2 is deductible rather than eligible for the usual tax credit treatment given to base CPP contributions, which slightly softens the net cost. The interaction is fiddly enough that most payroll software handles it and most manual estimates do not.
Why your calculator may be wrong
A great many take-home pay calculators — including ones maintained by otherwise reputable sources — still model base CPP only. The symptom is straightforward: enter a salary above the ceiling and the CPP figure stops rising, with no second line appearing.
The error is small in dollar terms, at most $416 a year. It matters more for what it signals. A calculator that has not been updated for a change introduced in 2024 has probably not been updated for the other changes since, and payroll parameters move every single year: the ceilings, the EI maximum and rate, the basic personal amount and the federal brackets all shifted for 2026.
The other 2026 numbers worth knowing
- EI: 1.63% on insurable earnings up to $68,900 outside Quebec — a maximum of $1,123.07. Quebec pays 1.30% because the province runs its own parental insurance plan.
- Federal basic personal amount: $16,452 at the maximum.
- Federal brackets: 14% to $58,523, then 20.5%, 26%, 29% and 33%.
The 14% bottom rate is itself recent — the lowest federal rate was reduced from 15% effective 1 July 2025, which produced a blended 14.5% for that year and a clean 14% from 2026. Any estimate still applying 15% to the first bracket is overstating federal tax for every worker in the country.
For employers, the combination of CPP2 matching and the annual ceiling increases means payroll cost per employee rises even when nobody gets a raise. It is a small number per head and a real one across a team.
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Frequently asked questions
- Who has to pay CPP2?
- Anyone whose pensionable earnings exceed the year’s maximum pensionable earnings — $74,600 in 2026. Below that, only base CPP applies.
- How much is CPP2 in 2026?
- 4% of earnings between $74,600 and $85,000, to a maximum of $416.00 for the employee. Employers match it.
- Is CPP2 a new tax?
- No. It is an additional CPP contribution that builds additional CPP retirement benefit, part of the enhancement phased in since 2019.
- Do self-employed people pay CPP2?
- Yes, and they pay both the employee and employer portions, so the maximum CPP2 contribution is doubled.
General information only — not tax, legal, accounting or financial advice. Rates change and individual circumstances vary. Confirm figures with the CRA, the IRS, your state or provincial authority, or a licensed professional before acting on them.
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Sources & methodology
FTT Finance-To-Thrive is an independent publisher of free finance calculators. The links below explain the rules and assumptions relevant to this page. Calculators use simplified models; for example, state and provincial income-tax estimates may omit brackets, credits, or local rules. See the formula and limitations on each calculator. We are not accountants, tax preparers, mortgage brokers or financial advisors, and nothing on this page is advice. Rates change and individual circumstances vary — confirm figures against the primary source before you file, sign or commit money. Read more about how we work and our funding & disclosure.
Page content last updated 2026-08-08
Primary sources
Source links are provided separately from the original content dates. They do not imply that an authority endorses this site or that every figure has been independently reviewed.
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