Question:
I am a little confused on how the software "simulates a tax return". How does this work?
Answer:
The software simulates a tax return, so for each future year of the illustration of assets and future income, income tax calculations are based on actual tax rules.
Other products usually use a single "marginal tax rate" for simplicity. By using accurate tax calculations, the numbers are more robust and reliable.
1. To compare income options for an investment of $100K, say GIC @ 4% versus a dividend payment of 4%: i) does the software use a different tax rate for the dividend ? ii) if yes, does the dividend get grossed up?
ReplyDelete2. Are the tax thresholds used in the software those of CRA or are the provincial categories incorporated as well?
Thanks.