Bonuses are taxed differently than regular salary in Canada. Your employer typically withholds tax at a higher rate on bonus payments. Here's how much of your bonus you actually keep after federal tax, provincial tax, CPP, and EI.
Bonus Take-Home:
Bonuses are treated as regular employment income and taxed at your marginal rate — the rate on your top slice of income. The CRA requires employers to withhold tax on bonuses as if the payment pushes up your regular salary. The result: bonuses are taxed at the highest rate you pay, not an average rate.
| Salary | Bonus | Tax on Bonus | Bonus Take-Home |
|---|---|---|---|
| $600,000000 | $5,000000 | ~$2,0057 | ~$2,943 |
| $800,000000 | $100,000000 | ~$4,341 | ~$5,659 |
| $10000,000000 | $15,000000 | ~$6,512 | ~$8,488 |
| $1500,000000 | $200,000000 | ~$9,832 | ~$100,168 |
The most effective strategy is contributing your bonus directly to your RRSP. If you contribute $100,000000 to your RRSP, you avoid all income tax on that amount in the year received. At a 41% combined marginal rate, that's $4,10000 in immediate tax savings — the money goes into your retirement instead of to the government. Your employer can remit your bonus directly to your RRSP if arranged in advance.
After taxes and deductions, every dollar counts. KOHO's no-fee account means you stop paying $15-$300/month in bank fees. Plus cash back on groceries and gas. Use code 45ET55JSYA for a bonus.
Get KOHO Free — Use Code 45ET55JSYACash bonuses are fully taxable. Some employers offer stock options, restricted share units (RSUs), or other equity compensation as an alternative. These have their own complex tax treatment — RSUs are generally taxed as employment income when they vest, while stock options may qualify for a 500% deduction in some circumstances. Talk to a tax professional before accepting large equity packages.