10. Tax Calculations#

Important: Tax estimates produced by Retirement Planner are projections for planning purposes only. They are not a certified tax calculation or a substitute for professional tax advice. Always consult a qualified tax professional for filing decisions.

10.1 How Taxes Are Estimated#

For each year of the retirement projection, the app calculates an estimated federal and provincial income tax figure based on the projected income for that year. The result is used to derive net (after-tax) income and to power the Income After Tax chart and the tax columns in the table view.

The calculation follows the standard Canadian progressive tax model:

1. Gross income for the year is assembled from all income sources in the strategy — CPP, OAS, pension, RRSP/RRIF withdrawals, TFSA withdrawals, business income, and investment income.
2. Taxable income is determined by identifying which sources are taxable (TFSA withdrawals and certain investment returns are non-taxable; everything else is generally taxable).
3. Federal tax is calculated by applying the progressive federal brackets to taxable income.
4. Non-refundable tax credits are subtracted — basic personal amount, age amount (if 65+), and pension income credit.
5. Provincial tax is calculated using the province of residence set on the client profile, applying that province’s own brackets and credits.
6. Additional levies are applied where applicable (Ontario surtax and health premium).
7. The result is the estimated tax payable for the year — a single dollar amount representing the balance owing or refund, net of any tax already withheld at source.

Net income is then: gross taxable income − estimated tax payable.

10.2 Federal Tax Brackets#

The app (at the time of writing this document) uses the 2025 federal income tax brackets. These are updated periodically via the automatic tax parameter system described in section 10.5.

The calculation applies each rate only to the income within that bracket — not to the full income amount. A person with $80,000 taxable income pays 15% on the first $57,375 and 20.5% on the remaining $22,625.

10.3 Province of Residence#

Provincial income tax varies significantly across Canada. The province is set on the client profile and drives all provincial tax calculations for that client. All 13 provinces and territories are supported:

Alberta · British Columbia · Manitoba · New Brunswick · Newfoundland & Labrador · Northwest Territories · Nova Scotia · Nunavut · Ontario · Prince Edward Island · Quebec · Saskatchewan · Yukon

Each province has its own bracket thresholds, rates, and basic personal amount. To change a client’s province, edit the client profile.

Quebec — special handling: Quebec residents receive a federal tax abatement of 16.5% because Quebec administers its own provincial programs (education, etc.) and collects its own separate provincial taxes. The app reduces the calculated federal tax by 16.5% for Quebec residents to avoid double-counting that portion of federal revenue.

Ontario — additional levies: Ontario imposes two levies on top of standard provincial tax:

• Ontario surtax — an additional 20% is charged on provincial tax above approximately $5,458, with a further 36% on provincial tax above approximately $6,985.
• Ontario Health Premium — an income-based premium ranging from $0 to $900 per year, tiered by income level.

Both are included in the Ontario tax estimate automatically.

10.4 Credits and Deductions Modelled#

The following non-refundable tax credits are applied in both the federal and provincial tax calculations:

Basic Personal Amount (BPA) Every Canadian resident is entitled to earn a base amount of income tax-free. The federal BPA for 2025 is $16,129. Each province has its own BPA (ranging from approximately $11,000 to $21,000 depending on province). The BPA is applied as a credit at the lowest bracket rate.

Age Amount (age 65 and over) Taxpayers aged 65 or older receive an additional non-refundable credit. The federal age amount is $8,790, subject to a 15% clawback on net income above $44,325. This means the age credit phases out gradually for higher-income seniors and disappears entirely around $103,000 of net income. Provincial equivalents apply similar clawback rules at their own thresholds.

Pension Income Credit Up to $2,000 of eligible pension income (pension plan / annuity payments, and RRSP/RRIF withdrawals at age 65 or later) qualifies for a federal credit at the 15% rate. Each province has its own pension credit limit (typically $1,000–$2,971).

OAS Recovery Tax (clawback) Old Age Security benefits are subject to a recovery tax of 15% on net income above $93,454 (2025 threshold). The OAS benefit is progressively reduced for higher-income retirees and is fully clawed back at approximately $152,000 of net income. The app models this by reducing the OAS income amount included in the projection — the recovery tax is reflected in the net OAS amount rather than as a separate line item.

What is NOT modelled:

10.5 Tax Parameter Updates#

Canadian federal and provincial tax parameters — bracket thresholds, rates, basic personal amounts, OAS/CPP benefit amounts, clawback thresholds — change each year with the federal budget and provincial equivalents. Keeping these values current without requiring a full app update is handled automatically.

How it works:

Once per week (at most), when the app launches and an internet connection is available, it silently checks whether updated tax parameters are available on the developer’s server. The check is lightweight — it reads only the file’s modification date rather than downloading the full file. If a newer version is available, the updated parameters are downloaded and stored on your Mac.

Loading priority: On startup, the app loads tax parameters in this order:

1. A previously downloaded update (most recent, stored in Application Support)
2. The parameters shipped with the app (used until the first update is downloaded)

This means your projections always use the most current published rates, even if the app itself has not been updated. When new parameters are downloaded, the charts and projections automatically recalculate.

No action required. The update process runs silently in the background. You do not need to trigger it manually or approve any download.

Offline use: If your Mac has not connected to the internet in a while, the app continues to function normally using the most recently downloaded parameters or the parameters bundled with the app version you have installed. Projections for future years use the current-year rates until new parameters become available.