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CPP Enhancement: What You Need to Know

As part of the federal government’s initiative to reduce the risk of shortage in retirement income for Canadians, starting in 2019, the Canada Pension Plan (CPP) rate will be increasing and is referred to as the CPP Enhancement.

This enhancement will be introduced in two phases. Firstly, from 2019 to 2023, the CPP rate will gradually increase from 4.95% to 5.95%.

Year

Employee

Employer

Self-Employed

2018

4.95%

4.95%

9.90%

2019

5.10%

5.10%

10.20%

2020

5.25%

5.25%

10.50%

2021

5.45%

5.45%

10.90%

2022

5.70%

5.70%

11.40%

2023

5.95%

5.95%

11.90%

Note: CPP deductions are calculated on income above $3,500 up to the yearly maximum pensionable earnings (YMPE) limit. This YMPE is set by the government and changes from year to year.

How will this impact you? Use the formula below to calculate your own CPP:
(Your Annual Gross Salary - $3,500) * % Employee

For example, the 2018 annual CPP deduction for an employee with a salary of $45,000 is:
($45,000 - $3,500) * 4.95% = 2,054.25

Secondly, in 2024, an additional CPP rate will be introduced on income above the YMPE, up to a new additional pensionable earnings limit.

Year

Employee

Employer

Self-Employed

2024

4.00%

4.00%

8.00%

For 2025, the government estimates the income limits to be:
YMPE - $69,700
Additional limit - $79,400

For example, the estimated 2025 annual CPP deduction for an employee with a salary of $75,000 will be:
Basic CPP = $3,938.90
Additional CPP = $212.00
Total CPP deduction = $4,150.90

We know taxes, deductions, and payroll can be confusing. Our bookkeeping and tax professionals are up-to-date on government requirements and know how to get rid of the confusion. Call us today to see how we can help with that.

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