diff --git a/README.md b/README.md index 0f2b6f1..35ab3d7 100644 --- a/README.md +++ b/README.md @@ -54,11 +54,11 @@ * The 'currentAge' uses the CURRENT TAX RATES, but future years the tax brackets are adjusted by inflation. The assumption is that if the net income stayed the same over time, the gross income required to process that net amount will DROP. * **Parameters** * **income** - array of net income - * **ageInFuture** - array of retireee age for given net income. + * **ageInFuture** - array of retiree age for given net income. * **currentAge** - present day age of retiree * **projectedInflation** - long term projected inflation rate - used to adjust TAX BRACKETS only. * We use the TAX RATES for the starting year, but can only guess the tax rates of future years. The basic personal exeption and tax brackets are adjusted by this inflation amount. - * **taxYear** - tax year of present day retireee. Used to adjust tax brackets. + * **taxYear** - tax year of present day retiree. Used to adjust tax brackets. * **projectedGains** - amount of assets sold each year subject to capital gains tax * **projectedDividends** - amount of dividends received each year * **yearlyOAS** - Old Age Security amount. Used to determine clawback (which is counted as a tax) @@ -83,6 +83,43 @@ * F2:F28 - expected OAS for the year * G2:G28 - income that qualifies for the pension credit +## Example Case for GET_GROSS_INCOMES_V2() vs. Taxtips.ca (2024 tax year) + +**=GET_GROSS_INCOMES_V2(50000, 70, 70, 0, 2024, 0, 5000, 9416, 2000)** +* This example is for a 70 year old in 2024 tax year. +* We want a net income of **$50,000** +* We have earned **$5,000** in dividends +* We have received **$9,416** in old age security payments (OAS) +* **$2,000** of our total income is from pension credit eligible taxable income. + +Results ==> **63613.38213** + +* Taxtips data entry and interpretation of results. +* [TaxTips.ca](https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm) + * Enter the following fields: + * Taxpayer birthyear ==> **1954** + * Are you single? ==> **yes** + * Old Age Security (OAS) (T4A(OAS) box 18) ==> **9416** + * Cdn dividends eligible for enhanced div tax credit (T5 box 24) ==> **5000** + * RRSP/RRIF withdrawals (when not eligible for pension tax credit) ==> **61613** + * The 63,613 is our total taxable income - which is $61,613 + $2,000 pension income + * Pension income (eligible for pension tax credit for persons 65+, pension splitting) ==> **2000** + * See results of calculation at bottom: + * Total taxes, clawbacks, CPP/EI premiums ==> **13613** + +### Results Interpretation. + * RRSP Withdrawal = 63,613 - (9416 + 2000) = **$52,197** + * If there is other taxable income such as CPP or taxable annuities, those amounts should be deducted from 52,197 to find the actual RSP withdrawal + * Our Net Income = 63,613 - 13,613 = **$50,000** + * The entire purpose of **GET_GROSS_INCOMES_V2()** is to find how much to be withdrawn from our RRSP and then subtract these amounts from our projected RRSP total asset value until we arrive at a specific value at some point in the future. + * For example, you may wish to have ZERO RRSP assets the year after your turn 85 - so you can solve for that. + * For my approach to RRSP meltdown strategy, see (https://demmings.github.io/canadiantaxes/2024/12/10/DIY-Calculating-future-RRSP-withdrawals.html) + * Adding CPP into TAXTIPS. + * Any other taxable data entered into TAXTIPS - like your CPP - you then need to subtract from **RRSP/RRIF withdrawals** entry - just like we did with the pension income. + * The total taxable income for all lines must add up to $63613 (from our custom function result) + * The reason we have an OAS parameter to the function and NOT CPP is that CPP is plain taxable income. OAS is special. Yes it is added as income but if your income is too high, it is clawed back - which changes our overall tax bill. + + ## Guiding Principle * The basic philosophy is that the GROSS INCOME is used to pay all taxes. * The capital gains, dividends, OAS, pension income is NOT included in the GROSS INCOME calculation. These values are for adjusting the total tax that is due.