Employment Insurance & Canada Pension Plan (CPP) Contributions
Whether you are self-employed or employed by somebody else, this will impact how employment insurance (EI) and Canada Pension Plan (CPP) contributions apply to your tax situation.
What if I am a salaried employee?
You will be required to make both EI and CPP contributions. Your employer must match your CPP contributions and must pay 1.4 times your EI contributions up to the yearly maximums below.
Both of these contributions that you pay qualify for non-refundable federal and provincial tax credits.
How does it differ for self-employed physicians?
As a self-employed physician, you don’t have to make EI contributions, but you can opt into a plan whereby you make EI contributions to receive what is known as special benefits. Special benefits include maternity, parental and sickness benefits.
With CPP contributions, as a self-employed physician, you must contribute both the employee and employer share. If you are earning more than the maximum pensionable earnings amount, you will owe $7508.90 for 2023 ($3,754.45 x 2).
While the employee share of your CPP payments qualifies for a tax credit, the employer’s share may be deducted from your individual federal income tax return. In other words, the employee share qualifies for a tax credit, while the employer share is treated as an income tax deduction.
How are EI premiums calculated?
EI premiums are calculated at 1.63% of insurable earnings of up to $61,500. For 2023, the maximum EI premium is $1002.45.
I’m a new doctor. Should I be concerned about EI?
Yes. Since you have paid EI premiums as a resident or fellow, you may be eligible to receive EI if you can’t find work.
Will I ever have to repay some of my EI benefits?
Maybe. If your income exceeds $76,875, you may have to repay a portion of your benefits. However, first-time claimants and those receiving special benefits like maternity and sickness benefits are not required to repay benefits, regardless of their income.
If you do have to repay some of your benefits, a deduction in the calculation of your net income will be allowed for making the repayment.
Canada Employment Credit
To help cover work-related expenses, all employees can claim a federal non-refundable employment tax credit.
For 2023, a credit equal to 15% of your employment income for the year, up to a maximum of $1,368 may be claimed.