Bonus Tax Calculator Ontario 2020

In 2020, Ontario introduced new rules for taxing bonuses. This calculator helps you determine how much tax you owe on your bonus payments, ensuring you understand your tax liability and plan accordingly.

How Bonus Tax Works in Ontario

Bonuses in Ontario are subject to income tax, but they are treated differently from regular wages. The tax treatment depends on whether the bonus is paid in a lump sum or in installments, and whether it's a discretionary or non-discretionary bonus.

Key points about Ontario bonus tax:

Bonuses are taxed as part of your total income for the year
Installment bonuses are taxed as they are received
Discretionary bonuses are taxed at the employee's marginal tax rate
Non-discretionary bonuses are taxed at the employer's marginal tax rate

Understanding these rules is crucial for accurate tax planning. The Ontario government provides specific guidelines for bonus taxation, which we've incorporated into this calculator.

How to Calculate Bonus Tax

Calculating bonus tax involves several steps. First, determine your total taxable income for the year, including the bonus. Then apply the appropriate tax rates based on your income bracket and the type of bonus you received.

Formula:

Bonus Tax = Bonus Amount × (1 - (1 - Federal Tax Rate) × (1 - Provincial Tax Rate))

Where:

Federal Tax Rate is your federal marginal tax rate
Provincial Tax Rate is your Ontario marginal tax rate

This formula accounts for both federal and provincial taxes. The calculator uses the 2020 tax rates and brackets to provide an accurate estimate of your bonus tax liability.

Ontario Bonus Tax Rates

In 2020, Ontario used the following tax brackets for calculating bonus tax:

Income Bracket	Federal Tax Rate	Ontario Tax Rate
$0 - $48,535	15%	5.05%
$48,535 - $97,069	20.5%	9.15%
$97,069 - $150,473	26%	11.16%
$150,473 - $220,383	29%	12.16%
$220,383+	33%	13.16%

These rates apply to discretionary bonuses. Non-discretionary bonuses are taxed at the employer's marginal tax rate.

Worked Examples

Let's look at two examples to illustrate how the bonus tax calculator works.

Example 1: Discretionary Bonus

John received a discretionary bonus of $5,000 in 2020. His total taxable income for the year was $80,000, placing him in the 20.5% federal and 9.15% Ontario tax brackets.

Calculation:

Federal Tax = $5,000 × 20.5% = $1,025

Ontario Tax = $5,000 × 9.15% = $457.50

Total Bonus Tax = $1,025 + $457.50 = $1,482.50

Example 2: Non-Discretionary Bonus

Sarah received a non-discretionary bonus of $3,000 in 2020. Her employer's marginal tax rate was 26% federal and 11.16% Ontario.

Calculation:

Federal Tax = $3,000 × 26% = $780

Ontario Tax = $3,000 × 11.16% = $334.80

Total Bonus Tax = $780 + $334.80 = $1,114.80

These examples demonstrate how the calculator applies different tax rates based on the type of bonus received.

Frequently Asked Questions

How is bonus tax different from regular income tax?: Bonus tax is calculated based on your total taxable income for the year, including the bonus amount. Regular income tax is calculated on your annual salary.
Are installment bonuses taxed differently?: Yes, installment bonuses are taxed as they are received throughout the year, rather than at the end of the year.
What happens if I receive multiple bonuses in a year?: Each bonus is taxed separately based on your total taxable income at the time of receipt.
Can I deduct bonus tax from my income?: No, bonus tax is a liability that must be paid to the government, not a deduction from your income.
How do I report bonus tax to the CRA?: You can report bonus tax on your annual tax return or through the CRA's online services.