# Tax on Vacation Pay



## Ozzkub (May 10, 2015)

Hi, I'm looking for tips or advice on withdrawing vacation pay without taking holidays. 

In the past, I've only ever used my vacation pay when we've gone on holidays. All deductions have remained relatively the same as a usual paycheque when I've done this. So In the last year or so, my wife and I determined that we'd sacrifice holidays for a few years in order to complete much needed reno's in our home. My plan was/is to use my vacation pay to help pay for this. Now it's starting to add up and I'm wondering if there if there's any way to minimize the tax I pay when withdrawing it? Should it be taken out in smaller amounts at a time, one lump sum, or does any of it matter, as it all evens out at spring tax time anyway?


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## Davis (Nov 11, 2014)

It all evens out in the spring. It's income, so you pay the tax like you do on other income.


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## 0xCC (Jan 5, 2012)

It does all even out in the spring but depending on how much you have built up relative to your regular pay you might want to consider stretching it out over a few pay cycles.

You can take a look at the tax rates for your province here: http://www.taxtips.ca/tax_rates.htm.

Figure out if taking all of your vacation pay in one pay cycle would bump you into a higher tax bracket based on that one larger paycheque (if you do the bigger paycheque * number of total paycheques in the year calculation does that move you up a tax bracket in your province?). If you do get bumped up to a higher tax bracket you will pay more tax today but as Davis states it will all even out in the spring.

If you want to keep more of the vacation pay today rather than waiting until the spring figure out how much you can take in one paycheque so that you don't get bumped into the next tax bracket (again, based on big paycheque * number of paycheques in a year). Doing that will minimize the refund you get in the spring but maximize the money you keep when your paycheque comes.


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