Tax on Commission in Ontario: Brackets, Withholding, and Deductions

Commission income in Ontario is taxed exactly like salary: your employer adds each commission payment to your regular pay, applies federal and Ontario income tax to the combined amount, and deducts CPP and EI on top. For 2026, combined marginal rates start at 19.05% on the first $53,891 of taxable income and reach 53.53% on income above $258,482. The tax on commission income in Ontario also picks up two provincial charges many earners forget — the Ontario surtax and the Ontario Health Premium — but commissioned salespeople get a wider set of expense deductions than salaried workers, which is the main lever for lowering what you actually owe.

How the Federal and Ontario Brackets Stack

Canada taxes income in graduated brackets at both the federal and provincial levels, so your commission is never taxed at a single flat rate. Each dollar falls into a bracket, and only the portion inside that bracket is taxed at that bracket’s rate.

For 2026, the federal government reduced the lowest marginal rate from 15% to 14%. The first roughly $58,523 of taxable income is taxed at 14% federally, then 20.5%, 26%, 29%, and finally 33% on income above roughly $258,482.¹

Ontario layers its own tax on top. The 2026 provincial brackets are:

5.05% on the first $53,891
9.15% on $53,891 to $107,785
11.16% on $107,785 to $150,000
12.16% on $150,000 to $220,000
13.16% on income above $220,000

If a big commission cheque pushes you into a new bracket, only the dollars above the threshold are taxed at the higher rate. Your earlier income keeps the lower rates it had.

The Ontario Surtax and Health Premium

Two Ontario charges push the real tax burden above what the bracket table suggests. Both tend to hit commission earners whose income climbs as the year progresses.

Ontario Surtax

The surtax is an additional percentage applied to your base Ontario provincial tax once it crosses certain thresholds. For 2026, 20% is added on provincial tax above $5,818, and another 36% (56% combined) applies on provincial tax above $7,446. In practice this starts to bite around taxable income of $90,000, depending on your credits. The CRA already builds the surtax into the Ontario payroll deduction tables, so you won’t see it as a separate line on your pay stub.²

Ontario Health Premium

The Ontario Health Premium is calculated on your tax return based on taxable income. It isn’t deducted at source the way CPP and EI are, although employers factor it into withholding tables. For 2026 the premium scales as follows:

$20,000 or less: $0
$20,001 to $36,000: up to $300
$36,001 to $48,000: up to $450
$48,001 to $72,000: up to $600
$72,001 to $200,000: up to $750
Over $200,000: up to $900

The maximum anyone pays is $900 a year.²

How Your Employer Withholds Tax on Commission Pay

The method your employer uses to calculate withholding doesn’t change your final tax bill — you settle up when you file — but it determines whether you’re lending the government money all year or scrambling to pay a balance in April.

Regular Commission Pay

When commissions arrive on a predictable schedule, the employer adds the commission to your regular salary for the pay period and runs the total through the standard payroll tables. This is what the CRA expects for commissions paid every pay period.³

Irregular or Lump-Sum Commissions

When commission payments jump around, the employer can use the bonus method. This annualizes the payment, calculates tax as if you’d earn at that pace all year, then pro-rates the withholding back to the single cheque. The result is often a noticeably higher deduction on that paycheque.⁴

Reducing Over-Withholding With Form TD1X

If you pay significant work expenses out of pocket, you can file Form TD1X (Statement of Commission Income and Expenses for Payroll Tax Deductions) with your employer. The form lets your employer estimate your annual commission expenses and reduce the income base used for withholding, so less tax comes off each cheque.⁵

The TD1X only adjusts withholding. It doesn’t change your tax liability. If your actual expenses come in lower than the estimate, you may owe at filing time. Update the form whenever your income or expenses shift during the year.

CPP, CPP2, and EI on Commission Pay

Every commission dollar also triggers mandatory payroll deductions. These apply to commissions the same way they apply to salary, and each has an annual ceiling that resets in January.

For 2026, you contribute 5.95% to CPP on pensionable earnings between the $3,500 basic exemption and the first ceiling of $74,600. Your employer matches.⁶

A second tier, CPP2, started in 2024. For 2026 it applies at 4% on earnings between $74,600 and a second ceiling of $85,000, with the employer again matching. Once you hit $85,000 in cumulative earnings for the year, CPP2 stops.

EI premiums run at 1.63% of insurable earnings for 2026, up to a maximum of $68,900. The employer’s share is 1.4 times the employee rate.⁷

If your commission income is loaded into certain months, you may notice these deductions disappear partway through the year once the ceilings are reached, then restart in January. That’s normal.

What Commission Employees Can Deduct

This is where commissioned employees have a real advantage over salaried ones. Under section 8(1)(f) of the Income Tax Act, if you’re employed in connection with selling or negotiating contracts, paid partly or entirely by commission, and required to pay your own expenses without a tax-free travel allowance, you can deduct a wide range of work-related costs against your commission income.⁸

One hard limit: your total deductions under this provision cannot exceed the commission income you actually received in the year. You can’t use these deductions to create a loss from employment.

Deductible categories include:

Advertising and promotion, including business cards, promotional items, and client gifts
Vehicle costs — fuel, insurance, maintenance, lease payments, and capital cost allowance on a vehicle you own and use for work
Travel costs when your duties require you to work away from your employer’s location, including lodging, meals (at a 50% limit), and parking
Client entertainment, capped at 50% of what you spend
Supplies used directly for work, such as stationery, postage, and printer cartridges
The work-related portion of leased cell phones, laptops, and similar equipment
Annual professional licence fees, bonding, and liability insurance
Accounting and legal fees for preparing your return or collecting unpaid commissions

Salaried employees without commission income are limited to a much narrower list.⁹

Vehicle Rates for 2026

If you use your personal vehicle for work, you can track actual costs or claim the CRA’s prescribed per-kilometre rates. For 2026 the deductible rates are 73 cents per kilometre for the first 5,000 business kilometres, and 67 cents for each additional kilometre. The same rates apply to gas, diesel, electric, and hybrid vehicles.¹⁰

If you use the per-kilometre rate for a vehicle you own, you have to choose that method in the first year the vehicle is available for business. For a leased vehicle, once you pick the per-kilometre method, it applies for the entire lease, including renewals. You can’t switch to actual-cost tracking later.

Forms and Records You Need to Keep

Claiming these deductions depends on two forms and a habit of saving receipts. Miss any of these and the CRA can deny the whole claim.

Your employer must complete and sign Form T2200 (Declaration of Conditions of Employment) to certify that you were required to pay your own expenses as a condition of your job. Without a signed T2200, you cannot claim employment expense deductions at all. If you work for more than one employer, each one needs to sign a separate T2200.¹¹

You then use Form T777 (Statement of Employment Expenses) to calculate your allowable deductions and file it with your return. The total flows to line 22900.⁹

You don’t submit receipts with your return, but you need to keep them in case of a review. Maintain a vehicle logbook recording the date, destination, kilometres, and business purpose of each trip. For meals and entertainment, keep the receipt plus a note on who attended and what business was discussed. For a home office, keep utility bills and a reasonable calculation of the work-use percentage. Hang onto everything for at least six years from the date you file.

Penalties for Misreporting Commission Income

Under section 163(2) of the Income Tax Act, filing a false statement or omission knowingly, or under circumstances amounting to gross negligence, triggers a penalty equal to the greater of $100 or 50% of the additional tax that should have been assessed. This covers underreported commission income and inflated expense claims alike.¹²

Separate penalties apply to employers who deduct the wrong amounts or remit late. Those don’t come out of your pocket directly, but if your employer under-deducted during the year, you can end up with an unexpected balance owing at filing time even though the mistake wasn’t yours.¹³

1
Office of the Parliamentary Budget Officer. Reducing the Lowest Federal Personal Income Tax Rate to 14 Per Cent
2
Canada Revenue Agency. Payroll Deductions Tables – T4032ON General Information
3
Canada Revenue Agency. Employees Paid Commission
4
Canada Revenue Agency. Bonuses, Retroactive Pay Increases or Irregular Amounts
5
Canada Revenue Agency. TD1X Statement of Commission Income and Expenses for Payroll Tax Deductions
6
Canada Revenue Agency. CPP Contribution Rates, Maximums and Exemptions
7
Canada Revenue Agency. EI Premium Rates and Maximums
8
Justice Laws Website. Income Tax Act – Section 8
9
Canada Revenue Agency. Employment Expenses 2025
10
Department of Finance Canada. Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for Businesses
11
Canada Revenue Agency. T2200 Declaration of Conditions of Employment
12
Justice Laws Website. Income Tax Act – Section 163
13
Canada Revenue Agency. Calculate Payroll Deductions and Contributions