Is a bonus under $5,000 taxed at 15% in Canada?

No. That is a misreading of the T4127. The $5,000 threshold applies to your annual taxable income, not to the bonus, and the flat 15.0% only applies where the whole year comes to that or less. On a normal salary the CRA method applies: tax on the year with the bonus, minus tax on the year without it.

How much tax is deducted from a $10,000 bonus in Ontario?

On a $85,000 salary, $2,965 in total — $2,965 income tax, with no CPP or EI because the salary already reached both ceilings. You keep $7,035, or 70.3% of it.

Are bonuses taxed at a higher rate than salary?

Not by a different rate schedule — a bonus is ordinary employment income. But it is taxed at the top of your income rather than the average of it, so the share withheld is your marginal rate, not your effective one. On $85,000 in Ontario that is 29.6% against an effective rate on the salary of 17.7%.

Do CPP and EI come off a bonus?

Yes, up to the annual ceilings. Once your salary has already reached the CPP and EI maximums for the year, a bonus paid after that carries income tax only — which is why a bonus in December often nets more than the same bonus in March.

Can I put my bonus in an RRSP to avoid the tax?

You can deduct it, which is not the same as avoiding it — the tax is deferred to when you withdraw. If your employer transfers the bonus directly to your RRSP they can reduce the withholding at source rather than making you wait for a refund. What the deduction returns depends on your marginal rate.

2026 · the CRA bonus method · all 13 jurisdictions

Canadian bonus tax calculator

The rule everyone repeats — that a bonus under $5,000 is withheld at 15% — is a misreading of one sentence in the CRA payroll guide. The $5,000 is your annual income, not your bonus.

Written and edited by Pablo Ruiz QuinteroSources checked September 1, 2026Method and rates read off the CRA on 2026-09-08

Rates 2026Where OntarioMethod CRA T4127

Annual salary

Bonus

Province or territory

You keep

$7,035

29.6% of the bonus withheld · your marginal rate on salary is 29.6%

The breakdown
Bonus	$10,000.00
Income tax	− $2,965.00
CPP	-$0.00
EI	-$0.00
Lands in your account	$7,035.00

No CPP or EI on this bonus: the salary already reached both annual ceilings, so only income tax comes off.

No, a bonus under $5,000 is not taxed at 15%

This is the most repeated wrong thing about Canadian bonuses, and it comes from misreading one sentence in the CRA's own payroll guide. The T4127 says: *"If the result above is less than or equal to $5,000, deduct 15.0% tax (10.0% in Quebec) from the bonus or retroactive pay increase."*

"The result above" is factor A — your annual taxable income. Not the bonus. The note sits directly underneath the formula that calculates A, and it exists for the case where someone's whole year comes to $5,000 or less. If you earn a salary, it will never apply to you.

The actual method is in the sentence before it, and it is this: *"the tax on a bonus is calculated by finding the tax on the total of regular annual income plus any previous bonuses plus the current bonus and subtracting the tax on the total of regular annual income plus any previous bonuses."*

Two calculations, one subtraction. On $85,000 in Ontario a $10,000 bonus takes the year's income tax from $15,011 to $17,976 — a difference of $2,965. That is the income tax on the bonus. It is what this calculator does, and it is what your payroll department does.

What actually lands from a $10,000 bonus

Income tax is not the whole of it. CPP and EI come off a bonus too — but only if you have not already hit their annual ceilings, which is where two people with the same bonus end up with very different cheques.

On $50,000 — $2,047 income tax, $595 CPP, $163 EI. $7,195 lands, 28.1% withheld.

On $85,000 — $2,965 income tax, and no CPP or EI at all: both ceilings were already reached by the salary. $7,035 lands, 29.6% withheld.

On $150,000 — $4,479 income tax, no contributions. $5,521 lands, 44.8% withheld.

Notice what happens between the first two. The higher earner has a higher marginal rate and still hands over a smaller share of the bonus than you might expect, because the contributions stopped. And notice the third: 44.8% of a bonus, against a marginal rate on salary of 43.4%. The bonus is taxed at more than your marginal rate because it pushes you into the next bracket — in Ontario, and past the surtax threshold on top of that.

And this is withholding, not your final tax

What comes off the bonus in the moment is a payroll estimate. Your real tax on that money is settled in April, when every credit you are entitled to applies — the ones this calculator leaves out included.

Two situations where the two diverge by a lot. If the bonus lands in a year you also had unpaid leave, a job gap or a big RRSP contribution, your annual income is lower than payroll assumed and you get some of it back. If you changed employers mid-year, each one withheld as though it were paying you all year, so both underestimated the total and you may owe.

An RRSP contribution is the standard move for a large bonus, and it is a real one: putting the bonus into an RRSP deducts it out of the year entirely, at your top rate. The RRSP calculator works out what that returns; on $10,000 at $85,000 in Ontario the deduction is worth about $2,965.

Where these figures come from

Read off the CRA's own documents, with the date each was read:

CRA — T4127 Payroll Deductions Formulas, 122nd edition (the bonus method, and the $5,000 note on annual taxable income) — read 2026-09-08. https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4127-payroll-deductions-formulas/t4127-jan/t4127-jan-payroll-deductions-formulas-computer-programs.html

CRA — T4127 Payroll Deductions Formulas, 123rd edition (the CPP base rate cut announced for 1 January 2027) — read 2026-09-08. https://www.canada.ca/en/revenue-agency/services/forms-publications/payroll/t4127-payroll-deductions-formulas/t4127-jul/t4127-jul-payroll-deductions-formulas.html

CRA — CPP contribution rates, maximums and exemptions (the self-employed rate and maximum) — read 2026-09-08. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/canada-pension-plan-cpp/cpp-contribution-rates-maximums-exemptions.html

CRA — Second additional CPP contribution (CPP2) rates and maximums — read 2026-09-08. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/calculating-deductions/making-deductions/second-additional-cpp-contribution-rates-maximums.html

CRA — EI premium rates and maximums, including the 1.4 employer multiplier — read 2026-09-08. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/employment-insurance-ei/ei-premium-rates-maximums.html

CRA — The Canada Pension Plan enhancement: what it means for the self-employed (the credit and deduction split) — read 2026-09-08. https://www.canada.ca/en/revenue-agency/news/2023/05/the-canada-pension-plan-enhancement--businesses-individuals-and-self-employed-what-it-means-for-you.html

Service Canada — EI special benefits for self-employed people: premiums — read 2026-09-08. https://www.canada.ca/en/services/benefits/ei/ei-self-employed-workers/premiums.html

And what is not covered:

— Business expenses are not deducted. A self-employed figure here is tax on net income after expenses, so enter what is left once your costs are out — not what you invoiced.

— Employer payroll taxes beyond CPP and EI are not included. Ontario's Employer Health Tax, British Columbia's employer health tax, Manitoba's Health and Post-Secondary Education Tax and Newfoundland's payroll tax all fall on the employer above their own thresholds, and each is set by its province.

— Quebec's employer QPIP contribution and its other employer contributions are not included in the employer cost, because Revenu Québec publishes them separately and they have not been read here.

— The bonus figure is the withholding your employer takes, which is the CRA method. It is not necessarily your final tax on that bonus: that is settled on your return, where every credit you are entitled to applies.

— GST/HST on self-employment income is not modelled. Registration is required once revenue passes $30,000 in four consecutive quarters, and the tax is collected from clients rather than paid out of income.

Where to go next

RRSP tax refund calculatorThe standard move for a large bonus, and what it returns.Paycheque calculatorThe regular pay the bonus sits on top of.CPP and EI calculatorThe ceilings that decide whether a bonus carries contributions.All Canadian calculatorsIncome tax, sales tax, property tax and the rest.

Questions

Is a bonus under $5,000 taxed at 15% in Canada?: No. That is a misreading of the T4127. The $5,000 threshold applies to your annual taxable income, not to the bonus, and the flat 15.0% only applies where the whole year comes to that or less. On a normal salary the CRA method applies: tax on the year with the bonus, minus tax on the year without it.
How much tax is deducted from a $10,000 bonus in Ontario?: On a $85,000 salary, $2,965 in total — $2,965 income tax, with no CPP or EI because the salary already reached both ceilings. You keep $7,035, or 70.3% of it.
Are bonuses taxed at a higher rate than salary?: Not by a different rate schedule — a bonus is ordinary employment income. But it is taxed at the top of your income rather than the average of it, so the share withheld is your marginal rate, not your effective one. On $85,000 in Ontario that is 29.6% against an effective rate on the salary of 17.7%.
Do CPP and EI come off a bonus?: Yes, up to the annual ceilings. Once your salary has already reached the CPP and EI maximums for the year, a bonus paid after that carries income tax only — which is why a bonus in December often nets more than the same bonus in March.
Can I put my bonus in an RRSP to avoid the tax?: You can deduct it, which is not the same as avoiding it — the tax is deferred to when you withdraw. If your employer transfers the bonus directly to your RRSP they can reduce the withholding at source rather than making you wait for a refund. What the deduction returns depends on your marginal rate.