Bonus tax in 2026: how it works, with a worked example

Questions people ask

How much tax is taken off a bonus in Canada?

Your marginal rate, the same as on a raise. On an $80,000 salary in Ontario a $10,000 bonus is taxed at about 29.65% plus any CPP and EI still owing, so you keep roughly $6,900 to $7,000. There is no special bonus tax rate.

Why was so much withheld from my bonus cheque?

Employers must use the CRA's bonus method, which taxes the bonus as if it were spread across the year at your top rate, and CPP and EI are taken without the usual per-period exemption. If too much is withheld, you get it back as a refund when you file.

Can I avoid tax on a bonus?

You can defer it: ask your employer to pay the bonus directly into your RRSP (up to your room) and no tax is withheld. You can also ask to receive it in January if your income will be lower next year.

Do CPP and EI apply to bonuses?

Yes, at the normal rates until you reach the annual maximums (CPP $4,230.45 plus $416 CPP2, EI $1,123.07 in 2026). If your salary already exceeds the ceilings, nothing more is taken.

Are commissions taxed differently?

No. Commissions are employment income taxed the same way; the only difference is that self-employed commission salespeople can deduct expenses.

What about a signing bonus or retention bonus?

Same treatment: employment income in the year received. If you later have to repay it, you can deduct the repayment in that year.

Why was 40% taken off my bonus?

Either your employer used the CRA bonus method, which taxes the bonus at your marginal rate (often 30% to 45% plus CPP and EI), or it lumped the bonus into a regular cheque and the payroll system annualized it as if you earned that every period. The calculator shows both amounts and what comes back at filing.

Can I put my bonus straight into my RRSP?

Yes, if you have room. Ask payroll before the bonus is paid; a direct contribution to a group RRSP or a transfer to your own RRSP is made without tax withholding. Enter the amount under 'Send part to my RRSP' to see the tax avoided and what you still get in cash.

What if I have to repay a signing or retention bonus?

The bonus is taxed in the year you receive it. If you repay it in a later year, you deduct the repayment in that year (line 22900 or as a salary repayment), which does not always fully offset the tax paid if your income was lower in the repayment year.

Is a bonus taxed at a higher rate than salary?

No. It is added to your employment income and taxed at your marginal rate like a raise. It only looks higher on the cheque because withholding on a lump sum is calculated differently from regular pay.