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While bonus payments are often an eagerly anticipated year-end event, they can sometimes be deflating if we don’t understand taxation.
Luckily, tax on bonuses doesn’t need to be complicated. By quickly calculating our take-home bonus, you can make informed decisions about budgeting, financial goals, and potential tax implications.
In this article, we'll explore how taxes on your base salary and bonus amount are calculated so that you can calculate a proper bonus payout.
How to calculate taxes on bonus payouts?
The taxes on bonuses are the same as if they were included in your basic salary. In Canada, bonuses are considered a taxable benefit and therefore are considered taxable income.
The tax rates, however, will vary depending on your Province or Territory. With the addition of the bonus to your salary, it is possible that part of your income will be taxed in the next tax bracket.
While we provide the tax bracket ranges in the article, we still recommend using a tax calculator (we’ll show you how below) so that you don’t have to calculate the tax on your bonus manually – saving you time.
To understand how bonus taxes are calculated, let's use an example.
For this example:
- You live in Ontario, Canada
- Your base salary is $80,000
- You are receiving a one-time bonus of $10,000.
- You want to know how much tax will be on the $10,000 bonus amount
Step 1 - Calculate taxes on base salary
To quickly calculate the taxes, you'll want a simple tax calculator.
In our example, the base salary is $80,000. In the tax calculator, add this amount to the Employment Income field of the calculator.
On the right, you'll see the Federal and Provincial tax breakdown. Take note of these amounts.
Step 2 - Calculate taxes on the base salary + bonus
In our example, we received a $10,000 bonus; add this to the $80,000 salary for a total of $90,000.
Next, enter this updated amount into the Employment Income field of the calculator. Again, take note of the updated Federal and Provincial tax amounts.
Step 3 - Subtract the difference between the combined taxes
Next, subtract the total Federal + Provincial tax amounts in Step 1 from Step 2.
(Step 2 Federal + Provincial Tax) - (Step 1 Federal + Provincial Tax) = Estimated taxes to be paid on your bonus.
In our example: $18,421 - $15,448 = $2,973.00
We can expect to pay an estimated $2,973 on the bonus of $10,000. The $15,448 of taxes may have already been deducted from our paycheque, so we don't consider this for the taxed amount on the bonus.
This two-step calculation, one with and one without the bonus is called the Bonus Method. We also discuss the Periodic method (the method the CRA uses to calculate income tax source deductions) comparison in the same article. You may notice that the two methods follow a similar logical structure.
For reference, you can see the Federal and Provincial tax rates. Note the calculator you used previously already took these rates into account. You do not need to recalculate it again.
Federal and provincial income tax rates
2024 federal income tax rates
2024 income tax rates by Province
Alberta
- 10% for income up to $148,269
- 12% for income between $148,269 and $177,922
- 13% for income between $177,922 and $237,230
- 14% for income between $237,230 and $355,845
- 15% for any taxable income above $355,845
British Columbia
- 5.06% for income up to $47,937
- 7.7% for income between $47,937 and $95,875
- 10.5% for income between $95,875 and $110,076
- 12.29% for income between $110,076 and $133,664
- 14.7% for income between $133,664 and $181,232
- 16.8% for income between $181,232 and $252,752
- 20.5% for any taxable income above $252,752
Manitoba
- 10.8% for income up to $47,000
- 12.75% for income between $47,000 and $100,000
- 17.4% for any taxable income above $100,000
New Brunswick
- 9.4% for income up to $49,958
- 14% for income between $49,958 and $99,916
- 16% for income between $99,916 and $185,064
- 19.5% for any taxable income above $185,064
Newfoundland and Labrador
- 8.7% for income up to $43,198
- 14.5% for income between $43,198 and $86,395
- 15.8% for income between $86,395 and $154,244
- 17.8% for income between $154,244 and $215,943
- 19.8% for income between $215,943 and $275,870
- 20.8% for income between $275,870 and $551,739
- 21.3% for income between $551,739 and $1,103,478
- 21.8% for any taxable income above $1,103,478
Nova Scotia
- 8.79% for income up to $29,590
- 14.95% for income between $29,590 and $59,180
- 16.67% for income between $59,180 and $93,000
- 17.5% for income between $93,000 and $150,000
- 21% for any taxable income above $150,000
Ontario
- 5.05% for income up to $51,446
- 9.15% for income between $51,446 and $102,894
- 11.16% for income between $102,894 and $150,000
- 12.16% for income between $150,000 and $220,000
- 13.16% for any taxable income above $220,000
Prince Edward Island
- 9.65% for income up to $32,656
- 13.63% for income between $32,656 and $64,313
- 16.65% for income between $64,313 and $105,000
- 18.00% for income between $105,000 and $140,000
- 18.75% for any taxable income above $140,000
Quebec
- 14% for income up to $51,780
- 19% for income between $51,780 and $103,545
- 24% for income between $103,545 and $126,000
- 25.75% for any taxable income above $126,000
Saskatchewan
- 10.5% for income up to $52,057
- 12.5% for income between $52,057 and $148,734
- 14.5% for any taxable income above $148,734
2024 income tax rates by territories
Northwest Territories
- 5.9% for income up to $50,597
- 8.6% for income between $50,597 and $101,198
- 12.2% for income between $101,198 and $164,525
- 14.05% for any taxable income above $164,525
Nunavut
- 4% for income up to $53,268
- 7% for income between $53,268 and $106,537
- 9% for income between $106,537 and $173,205
- 11.5% for any taxable income above $173,205
Yukon
- 6.4% for income up to $55,867
- 9% for income between $55,867 and $111,733
- 10.9% for income between $111,733 and $173,205
- 12.8% for income between $173,205 and $500,000
- 15% for any taxable income above $500,000
2023 federal income tax rates
- 15% up to $53,359 of taxable income
- 20.5% between $53,359 and $106,717
- 26% between $106,717 and $165,430
- 29% between $165,430 up to $235,675
- 33% on any amount taxable income exceeding $235,675
2023 income tax rates by Province
Alberta
- 10% for income up to $142,292
- 12% for income between $142,292 and $170,751
- 13% for income between $170,751 and $227,668
- 14% for income between $227,668 and $341,502
- 15% for any taxable income above $341,502
British Columbia
- 5.06% for income up to $45,654
- 7.7% for income between $45,654 and $91,310
- 10.5% for income between $91,310 and $104,835
- 12.29% for income between $104,835 and $127,299
- 14.7% for income between $127,299 and $172,602
- 16.8% for income between $172,602 and $240,716
- 20.5% for any taxable income above $240,716
Manitoba
- 10.8% for income up to $36,842
- 12.75% for income between $36,842 and $79,625
- 17.4% for any taxable income above $79,625
New Brunswick
- 9.4% for income up to $47,715
- 14% for income between $47,715 and $95,431
- 16% for income between $95,431 and $176,756
- 19.5% for any taxable income above $176,756
Newfoundland and Labrador
- 8.7% for income up to $41,457
- 14.5% for income between $41,457 and $82,913
- 15.8% for income between $82,913 and $148,027
- 17.8% for income between $148,027 and $207,239
- 19.8% for income between $207,239 and $264,750
- 20.8% for income between $264,750 and $529,500
- 21.3% for income between $529,500 and $1,059,000
- 21.8% for any taxable income above $1,059,000
Nova Scotia
- 8.79% income up to $29,590
- 14.95% for income between $29,590 and $59,180
- 16.67% for income between $59,180 and $93,000
- 17.5% for income between $93,000 and $150,000
- 21% for any taxable income above $150,000
Ontario
- 5.05% for income up to $49,231
- 9.15% for income between $49,231 and $98,463
- 11.16% for income between $98,463 and $150,000
- 12.16% for income between $150,000 and $220,000
- 13.16% for any taxable income above $220,000
Prince Edward Island
- 9.8% for income up to $31,984
- 13.8% for income between $31,984 and $63,969
- 16.7% for any taxable income above $63,969
Quebec
- 15% for income up to $49,275
- 20% for income between $49,275 and $98,540
- 24% for income between $98,540 and $119,910
- 25.75% for any taxable income above $119,910
Saskatchewan
- 10.5% for income up to $49,720
- 12.5% for income between $49,720 and $142,058
- 14.5% for any taxable income above $142,058
2023 tax rates by territories
Northwest Territories
- 5.9% for income up to $48,326
- 8.6% for income between $48,326 and $96,655
- 12.2% for income between $96,655 and $157,139
- 14.05% for any taxable income above $157,139
Nunavut
- 4% for income up to $50,877
- 7% for income between $50,877 and $101,754
- 9% for income between $101,754 and $165,429
- 11.5% for any taxable income above $165,429
Yukon
- 6.4% for income up to $53,359
- 9% for income between $53,359 and $106,717
- 10.9% for income between $106,717 and $165,430
- 12.8% for income between $165,430 and $500,000
- 15% for any taxable income above $500,000
Wrapping it up
Understanding how bonuses are taxed in Canada is important for employees seeking to optimize their earnings and avoid unexpected tax obligations.
Bonuses are taxed as income, with rates varying by province or territory. Employees can use the Bonus Method and a simple tax calculator to quickly calculate their tax liability on their base salary and bonus, helping them make informed decisions about their bonus payouts.
So, take the time to familiarize yourself with the process and use the provided examples to navigate bonus taxation with confidence.
Let us help with your bonus strategy
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- Already a Knit customer? Find out how to Add a one-time Bonus to a Payroll
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