Total Tax Assumptions
The Federal and Provincial tax calculations in Snap are made using the assumption that the current Canadian tax system is not going to change drastically, which is the best assumption that we can make as of today.
The Total Tax paid is displayed in a column under Tax and Deductions on the Planning page. More details are available when you click the blue icon under the title of the column.
If any foreign withholding tax is applicable, it is included in the federal tax amount. (The foreign withholding tax default is 15%). Update the Portfolio Settings to adjust the percentage of foreign dividends in the Equity asset class allocation.
The provincial and federal tax brackets and applicable tax credits and deductions are indexed to inflation.
In the following example, the inflation rate has been set to 2%. Fields are also available for non-refundable tax credits, tax deductions and taxable benefits. To open the Tax & Inflation page in your scenario, go to the Planning page for the client or spouse, click Scenario Setup -> Settings -> Tax & Inflation.
If a client's taxable income remains constant in the projections you will see a reduction in the Total Tax paid each year (and the effective tax rate) as the tax credits increase with inflation while the taxable income remains constant.
Note: Ontario Provincial Health Premium
The Ontario Health Premium is collected at the same time as provincial taxes are paid in Ontario. Snap Projections does not include the Ontario health premium in the Provincial tax calculations as it is separate from the Provincial Tax. The amount of the health premium ranges from $0 to $900 per year based on the individual's Taxable Income.
In order to include this expense as part of a client's projections, you can increase the After-Tax Spending by the estimated annual premium amount. Alternatively, you can create a new expense for the premium.