Canada Pension Plan (CPP) for the self-employed

If you are self-employed, you have to pay Canada Pension Plan (CPP) contribution based on your net profit (after expenses). 

How is the contribution calculated?

The first $3,500 of earnings is exempt. The contribution is calculated by multiplying the remainder (up to maximum) by the contribution rate.  

Examples: 

Year 2015:

1). Net earning is $3,000: no contribution is required because the earning is under $3,500

2). Net earning is $38,000: contribution is $3,415.50 ((38,000 – 3,500) x 9.9%)

3). Net earning is $60,000: contribution is $4,959.90 (earning over the maximum).

How is it paid?

The CPP contribution is reported on the personal tax return. It is is payable when the personal tax return is filed

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How is it reported?

Compared to a salaried employee with the same earning, the self-employed pays twice amount in CPP contribution (the rate for self-employed is 9.9% and 4.95% for salaried employee in 2013). One-half of the contribution may be deducted as business expense on line 222 to reduced taxable income. Like salaried employees, the other half is eligible for a non-refundable tax credit claimed on line 310.

How to stop paying CPP?

How to deduct vehicle expenses?

Canada Pension Plan (CPP) rates and maximums for self-employed 

Employment insurance (EI) for the self-employed

Basic payroll information for employers

 

 

Additional information