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How the tax model works

The simulator estimates the taxes you would pay each year so the chart reflects what you actually get to spend. It uses 2026 federal and provincial tax rules, kept deliberately simple — enough to be directionally honest, not so much that it pretends to be a tax return.

This page lays out exactly what is and is not modelled, grouped by topic, with the regulatory references at the bottom for anyone who wants to check the source.

Income tax basis

  • Tax brackets, the basic personal amount, and the OAS and GIS income limits rise each year with the government's published inflation figure — not with the inflation rate you set for your own spending.

Account treatment

  • TFSA withdrawals are completely tax-free.
  • RRSP/RRIF, CPP, OAS, and non-registered withdrawals are treated as taxable income.
  • Locked-in accounts (LIRA/LIF) have both a yearly minimum and a yearly maximum withdrawal, modelled on the federal rules. Withdrawals are taxable like RRIF income. The maximum uses the federal pension floor rate (6%); the real limit moves slightly with long-term bond yields.

Benefits & credits

  • OAS clawback and the GIS supplement for low-income seniors are applied.
  • Federal age amount (65+) and federal pension income credits are applied; age amount phases out at higher incomes.
  • Ontario applies an additional provincial tax at higher incomes; it is included in the estimate.
  • When CPP sharing is turned on, it is modelled as a full even (50/50) split of the two partners’ combined CPP — the upper bound of what can be shared. Under the rules (CPP s.65.1), only the portion of each pension earned during the years the couple was together is shareable, so a real election usually shares somewhat less; the model assumes full shareability.

Capital gains & non-registered

  • Non-registered uses a simplified fully-taxable model — capital gains treatment not yet modeled.

Leverage & fees

  • Investment-loan interest deductibility follows CRA's tracing rule (Folio S3-F6-C1): the deductible share shrinks when you spend from the invested borrowed funds. Directional estimate only.
  • Investment-counsel fees on non-registered accounts are treated as tax-deductible per CRA ITA §20(1)(bb). Fees on RRSP, RRIF, and TFSA accounts are not deductible. Directional estimate only.
  • Non-registered withdrawals: when cost-basis modeling is enabled, only the capital-gain portion of each draw is taxable, and Canada includes only 50% of that gain in income (CRA ITA §§38–39). Without cost-basis input, the engine treats the entire draw as taxable as a conservative default. Directional estimate only.

Not yet modelled

  • Does not yet model provincial age-amount equivalents or dividend tax credits.

Province-specific notes

Each province has its own wrinkles. When you pick a province in the simulator, the relevant note appears alongside your projection. Here they all are in one place:

  • Alberta: Provincial tax for Alberta uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • British Columbia: Provincial tax for British Columbia uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Manitoba: Provincial tax for Manitoba uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • New Brunswick: Provincial tax for New Brunswick uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Newfoundland & Labrador: Provincial tax for Newfoundland & Labrador uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Nova Scotia: Provincial tax for Nova Scotia uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Northwest Territories: Provincial tax for Northwest Territories uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Nunavut: Provincial tax for Nunavut uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Ontario: Provincial tax for Ontario uses progressive brackets; Ontario applies an additional provincial tax at higher incomes. Province-specific age-amount equivalents are not yet modeled.
  • Prince Edward Island: Provincial tax for Prince Edward Island uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Québec: Provincial tax for Québec uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Saskatchewan: Provincial tax for Saskatchewan uses progressive brackets; province-specific age-amount equivalents are not yet modeled.
  • Yukon: Provincial tax for Yukon uses progressive brackets; province-specific age-amount equivalents are not yet modeled.

Regulatory backing

For anyone who wants to trace an assumption back to its source, here are the references behind the rules above:

  • Investment-loan interest tracing — CRA Income Tax Folio S3-F6-C1.
  • Investment-counsel fee deductibility — Income Tax Act §20(1)(bb).
  • Capital-gains inclusion rate — Income Tax Act §§38–39.
  • Pension income splitting — CRA Form T1032.

A reminder

All projections are assumption-based — not financial, tax, or investment advice.

It is a directional estimate to help you understand the shape of your plan — not a tax filing, and not a substitute for advice from a professional who knows your full situation.