Payroll Tax Deduction Rates
in the U.S. and Canada

Published November 2012 | Edited November 7, 2024

In this chat, I'll answer these two questions:

1. What is the employer's and employee's Social Security tax rate for 2025?
2. What are the CPP and EI rates for 2025?

Payroll tax deductions are mandatory for small business owners in the U.S. and Canada. If they are giving you "tech" neck, here is a nice short chair sitting routine to ease pain in the neck and shoulders caused by looking at your computer, phone or other screens.

Turn off your phone for just a few minutes while you browse through these rates. I've put together a chart to show you the comparable payroll tax components between the U.S. and Canada.

2025 FICA limits were announced in early October 2024 and increased approximately 4.4%. Medicare taxes (2.9%) have no cap on earnings. 

A history of FICA & SECA rates from 1937 to present can be found at https://www.ssa.gov/OACT/ProgData/taxRates.html

EE = employee's portion of FICA, ER = employer's portion of FICA

2025 FICA	EE Rate	ER Rate	EE+ER Rate	Wage Base Limit	Maximum Tax
Social Security	6.2%	6.2%	12.4%	$176,100	$10,918.20 EE $10,918.20 ER
Medicare	1.45%	1.45%	2.9%	$200,000	$2,900 EE $2,900 ER
Medicare	2.35%	1.45%	3.8%	over $200,000	no limit

FICA (Federal Insurance Contributions Act) establishes two taxes on self-employed workers, employers, and employees.

     ✔ The first employee payroll tax known as the Social Security tax is for Old Age, Survivors and Disability Insurance (OASDI).
     ✔ The second employee payroll tax known as the Medicare tax is for Hospital Insurance (HI).

Business owners (YOU) are responsible for:

1. Withholding the employee's social security tax from an employee's pay check;
2. Calculating the employer's social security tax;
3. Remitting the mandatory payroll tax deposit.
4. Submitting your quarterly employer return IRS Form 941.
5. Submitting IRS Form 4070 which is your monthly reporting of tips.

2025 CPP Rates were released in November 2024. The contribution rate remained at 5.95%. CPP Enhancement, which began implementation on January 1, 2019, is fully implemented for 2025.

Beginning in 2024, a second earnings ceiling was introduced, the Year’s Additional Maximum Pensionable Earnings (YAMPE). The YAMPE is used to determine second additional Canada Pension Plan contributions (CPP2). "In 2024, the YAMPE is approximately 7% above the Year’s Maximum Pensionable Earnings (YMPE). In 2025 and every year after, the YAMPE will be approximately 14% above the YMPE." As a result, pensionable earnings between YMPE and  YAMPE are subject to additional contributions (CPP2).

CPP Rates	2025
Employee (EE) Contribution Rate CCP1	5.95%
Employer (ER) Contribution Rate CCP1	5.95%
Basic Exemption	$3,500
Maximum Pensionable Earnings (YMPE)	$71,300
Maximum Contribution CCP1	$4,034.10
Maximum Monthly Contribution CCP1	$336.18
Additional Maximum Pensionable Earnings (YAMPE)	$81,200
Maximum Contribution CCP2	$396
EE/ER Contribution Rate CCP2	4%

2025 EI Rates were released in mid-September 2024. The mandated 7 year break even objective has resulted in changes to 2025 rates.

EI Rates	2025
Employee Contribution Rate	1.64%
Employer Contribution Rate	2.30%
Maximum Insurable Earnings	$65,700
Maximum Contribution	$1,077.48

CRA (Canada Revenue Agency) and Social Development Canada share administration responsibilities of payroll taxes on self-employed individuals, employers, and employees.

     ✔ Canada Pension Plan (CPP) contributions are shared by employers and employees. Self-employed individuals pay both the employee and employer portions.
     ✔ Employment Insurance (EI) premiums are shared by employers and employees and set by The Canada Employment Insurance Finance Board (CEIFB). Self-employed individuals do not pay EI premiums unless they have opted into the volunteer EI program.
     ✔ Medical premiums are administered provincially.

Business owners (YOU) are responsible for:

1. Opening a payroll account with CRA;
2. Obtaining information from employees through the TD1 Form;
   
3. Withholding the employee's federal CPP contributions, EI premiums and income tax withholdings from an employee's pay cheque;
4. Withholding provincial medical premiums if you are based in BC, Alberta or Ontario;
5. Calculating the employer's share of payroll taxes;
6. Remitting the mandatory source deductions via PD7A Form each reporting period (assigned when you open your account with CRA);
   
7. Paying provincially administered workers compensation premiums;
8. Issuing T4 and T4A slips annually; and
   
9. Submitting your annual information returns to CRA for T4 and T4A slips issued.