Year-end bonus coming? Here's what actually reaches your account — and the move that keeps all of it
A $10,000 bonus on a $90,000 Ontario salary nets about $7,035 after tax. Sent to your RRSP instead, the full $10,000 goes to work. How bonus tax really works, and what to ask payroll before December.
Bonus season is a few weeks away, and the number on the offer letter is rarely the number that lands in your account. The good news: the "bonus is taxed at a special higher rate" idea is a myth. The better news: there is a way to keep the whole amount.
A bonus is just more income, taxed at your top rate
Your bonus is added to your 2026 employment income and taxed at your marginal rate — the rate on your last dollar. It isn't a separate bracket and it isn't taxed twice.
Take someone earning $90,000 in Ontario. Metrestick's 2026 tax parameters put their take-home at about $65,768 a year, with a 29.65% marginal rate. Add a $10,000 bonus and take-home rises to about $72,803.
- Bonus: $10,000
- Income tax at 29.65%: about $2,965
- CPP and EI: $0 extra, because both are already maxed out at $90,000
- What you keep: about $7,035
That last point is a quiet advantage. If your salary is under the CPP and EI ceilings, part of the bonus also pays payroll deductions; above them, only income tax applies.
Payroll may withhold more than your true marginal rate on a large lump sum, which makes the cheque look smaller. That's a cash-flow timing issue, not extra tax — any over-withholding comes back as a refund when you file.
The move that keeps all $10,000: send it to your RRSP
If you have unused RRSP room, ask payroll whether your employer can deposit part or all of the bonus directly into your RRSP instead of paying it out.
- Contributions made through payroll to your RRSP can be exempt from withholding at source, because the deduction offsets the tax.
- You still claim the contribution on your 2026 return — the deduction is worth about $2,965 at a 29.65% marginal rate.
- Net result: $10,000 invested instead of $7,035, and the tax refund the contribution would have generated on the 7,035 version never needs chasing.
Some employers need written notice by a specific payroll cutoff, and withholding relief for RRSP contributions may require CRA approval (Form T1213) if your employer doesn't already handle it — so ask in early November, not mid-December. Your RRSP room is on your CRA My Account notice of assessment.
When the RRSP isn't the best use
An RRSP isn't automatically right. Weigh it against the alternatives:
- High-interest debt. A credit card at 20%+ beats nearly any investment return. Pay it first.
- A low bracket now. If you expect to retire at a higher bracket than today's, the TFSA is usually the better home. Our TFSA vs RRSP breakdown walks through the decision.
- A down payment on the horizon. The FHSA may fit better than either.
What to do this month
- Check your RRSP and TFSA room before the bonus is announced.
- Ask payroll about direct RRSP deposits and their cutoff date.
- Run your own numbers in our take-home pay calculator — enter your salary with and without the bonus and look at the difference.
Figures: Metrestick 2026 federal and Ontario tax parameters; estimate only, verify against CRA before relying on it. Source: Metrestick.