Salaried income with a variable bonus: what counts, and what doesn't.

The base salary line is straightforward: the lender takes the current annual salary from a recent pay stub and a letter of employment confirming position, start date, and pay rate, and qualifies on that figure at close to full value. It's the most reliable income type a file can have, because it's contractual and doesn't depend on performance, sales, or company results.

The bonus is underwritten as a separate, variable component layered on top — never blended into the base salary figure. That separation is what lets a lender apply a completely different, more conservative set of rules to the bonus portion without penalizing the guaranteed salary underneath it.

The standard approach is a two-year average: the bonus amounts shown in box 14 of the last two T4 slips (bonus is included in total employment income on the T4, not broken out separately, which is why the employer's letter matters — see below) are added together and divided by two, then that average is added to the base salary.

Some lenders will use a shorter or longer history depending on the file, and a few will accept the most recent year alone if it's flat or growing and well-documented — but two years is the convention to plan around, and the employer's written confirmation of the bonus history and structure is what makes the averaging exercise credible instead of guesswork.

A bonus is far more likely to count when it has all of the following:

• →At least a two-year history at the same employer, shown on consecutive T4s.
• →A documented structure — the employer's letter describes it as a recurring part of compensation (annual performance bonus, year-end bonus), not a one-off.
• →A stable or growing trend year over year, rather than an unexplained spike.
• →A reasonable expectation of continuance — nothing in the letter or the borrower's circumstances (role change, department wind-down) suggests it's ending.

The opposite pattern is where files run into trouble. A signing bonus or one-time retention payment is excluded outright — it isn't going to repeat, and no lender qualifies income that has no reasonable expectation of continuing. A bonus with only one year of history is usually excluded too, or at best heavily discounted, simply because one data point isn't a pattern yet.

A declining bonus — last year materially lower than the year before — typically gets averaged down rather than excluded, or the lender uses the lower of the two years instead of the average. A bonus explicitly described as fully discretionary, with no formula and no history of being paid in down years, is the hardest to get counted at all, because “discretionary” is underwriting language for “not guaranteed to happen again.”

The file that clears fastest pairs the numbers with the story behind them:

1. 01T4s for the last two years, showing total employment income (base plus bonus combined).
2. 02A letter of employment stating the base salary separately and describing the bonus structure — how it's calculated, how often it's paid, and whether it's expected to continue.
3. 03Recent pay stubs confirming current base salary and, where available, year-to-date bonus accrual.
4. 04An explanation for any anomaly — a spike, a gap, or a drop — in a short cover note rather than leaving the underwriter to guess.

This is the same documentation discipline covered more broadly in Income Document Red Flags Underwriters Catch in Seconds — bonus files are one of the most common places those red flags show up.