Student guide: Explaining tax deductions on your pay stub.

So, you landed your first job, congrats! Whether you’re scooping ice cream, folding hoodies at the mall, or handing out fries at the drive thru, getting that first paycheque feels amazing…until you notice something confusing.

“Wait… who is taking all my money?!”
 

If your paycheque looks way smaller than what you expected, don’t panic, it’s normal. Every Canadian pay stub includes deductions (money taken off your pay before it lands in your bank account). These deductions help pay for things like taxes, retirement, and insurance programs you might use one day. Understanding them now puts you way ahead of most adults.
 

Let’s break it down, nice and simple.

What exactly is a pay stub?
A pay stub is the record of how much you earned, how often you got paid, and what was taken off your pay. It usually shows:

• Gross pay: What you earned before deductions.

• Deductions: The amounts taken off.

• Net pay: The amount you actually take home.

• Year-to-date totals: How much you’ve earned and paid so far.

These are standard across Canada. 

The “big three” mandatory deductions on your pay stub.
In Canada, most workers have three main deductions:

1. Income tax: This is money the government uses to pay for stuff like roads, healthcare, and schools. The amount taken depends on how much you earn and where you live. Canada uses a graduated tax system, meaning higher earnings get taxed at higher rates. Tax rates change each year, so don’t worry, your employer calculates it for you automatically.

    

2. CPP – Canada Pension Plan: CPP is a retirement pension you’ll receive later in life. It’s not just for “old people” – think of it as future you’s savings account. You and your employer both pay into it if you work outside Quebec. CPP rules update over time, and as of 2026 it includes two contribution lines (CPP and CPP2) due to enhancements meant to boost future benefits. You can learn more about CPP on the Government of Canada’s webpage: Canada Pension Plan Retirement Pension.

    

   Note: You only start paying CPP contributions once you're over the age of 18.

    

3. EI – Employment Insurance: EI helps workers if they lose their job or can’t work due to illness or certain life changes. You pay a small percentage of your earnings into EI, up to a yearly maximum. In 2026, EI contributions are based on annual max insurable earnings set by the government. You can learn more about employment insurance on the Government of Canada’s webpage: Employment Insurance Benefits.

Why does understanding deductions matter?
Because understanding your money helps you keep your money.

Getting familiar with your pay stub means you can:

• Catch mistakes (yes, they happen!)

• Budget better (hello savings goals).

• Know whether you’ll get a tax refund.

• Understand benefits your employer offers.

Plus, these deductions follow you throughout your working life. Learning them early? Super smart.

Other deductions you might see.
Not all deductions are mandatory. Some depend on your job:

• Health or dental benefits.

• Union dues.

• Group RRSP contributions.

• Parking or uniform fees.

• Charitable donations.

Your pay stub will list them under a “voluntary” or “other deductions” section.  

Your first paycheque might surprise you.
Almost every student looks at their first pay cheque and says:

“What’s CPP and why are they taking my money?”

Totally normal. CPP, EI, and income tax can take a noticeable chunk, but they’re all programs that protect and support you.

And the best part?
If too much tax was deducted during the year, you might get some back when you file your tax return.

That’s where H&R Block comes in, we make sure you get every credit and deduction you deserve, so you keep more money in your pocket. 

Quick example:
Let’s say your gross pay for the week is $300.

Your pay stub might show:

• CPP: a small %

• EI: another small %

• Income tax: depends on what you earn overall

• Net pay: what's left after deductions

You might take home something like $240–$260, depending on your province and total income.

Frequently asked questions.

Final thoughts from H&R Block Canada.
Your pay stub isn’t trying to confuse you, it’s just showing how your earnings are split between your pocket today and your future benefits tomorrow. Once you understand the deduction lines, you’ll feel way more confident managing your money, and that’s a skill you’ll use for life.