Unlike some countries, Canada has no legally mandated year-end or '13th-month' bonus — any bonus you receive is at your employer's discretion, based on your employment contract or company policy, not a universal legal entitlement.
Bonuses are taxed as regular income, but employers often withhold tax on a bonus at a higher rate than your regular paycheque (since it's a lump sum added on top of your normal pay) — this doesn't mean you owe more tax overall, just that more is withheld upfront. You'll reconcile the actual amount owed when you file your tax return, and may get some of that extra withholding back as a refund.
Before deciding what to do with a bonus, check two things: do you have high-interest debt (like a credit card balance), and is your emergency fund complete? If you have high-interest debt, paying it down usually beats any investment return you'd realistically get. If your emergency fund isn't at your target (see the emergency fund guide on this site), a bonus is a natural way to make progress in one lump sum.
If your high-interest debt is under control and your emergency fund is complete, a bonus is a good opportunity to make a larger-than-usual contribution to your TFSA or RRSP — see the retirement savings guide on this site for how to decide between the two, and check your remaining contribution room before contributing a large lump sum.
Informational content, not financial, tax, or legal advice. Verify amounts, limits, and current conditions directly with official sources (CRA, CDIC, OSFI) before making a decision.
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