CRA lump sum withholding tax formulas
Accurately applies CRA lump sum withholding rates (10%, 20%, 30%) on retiring allowances.
Severance Package Comparison Calculator
Compare severance payout methods in Canada. Calculate estimated CRA tax withholding, RRSP tax sheltering, benefit continuation value, and new job mitigation.
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How to use Severance Package Comparison Calculator
- 1
Select your Canadian province and enter your annual base salary and years of service.
- 2
Enter the total number of severance weeks offered by your employer.
- 3
Input your available RRSP contribution room to calculate direct tax-sheltered transfers.
- 4
Specify expected job search duration to evaluate clawback and mitigation clauses in salary continuance.
- 5
Review the side-by-side comparison of net cash in hand, tax withheld, and cash flow timing.
Why use this tool?
RRSP direct transfer sheltering
See exactly how transferring part of your severance directly to an RRSP avoids immediate withholding tax.
New job mitigation scenario modeling
Simulates what happens if you find a new job during the continuance period with employer clawback terms.
Frequently asked questions
What is the difference between a lump sum and salary continuance severance?
A lump sum pays your entire severance amount upfront (subject to lump sum withholding tax). You keep the full amount even if you get hired the next day. Salary continuance pays your regular salary on normal pay cycles with continued benefits, but often includes a "mitigation clause" where payments reduce or stop once you find new employment.
How much tax is withheld on a lump sum severance in Canada?
Under CRA regulations (outside Quebec), lump sum retiring allowances are subject to withholding tax of 10% on amounts up to $5,000; 20% on amounts between $5,001 and $15,000; and 30% on amounts over $15,000. Your final tax liability is determined when filing your annual return.
Can I transfer severance directly to an RRSP without tax withholding?
Yes! If you have available RRSP contribution room, you can instruct your employer to transfer that portion directly into your RRSP without deducting withholding tax.
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