Square peg in a square hole in CAD

I work in Rhino, and I know that a square peg (for example) will fit
in a square hole of the same size on my monitor, but not in reality.
In order to fit together the peg must be smaller than the hole, and
I’m wondering what most of you use as an offset.

That’s an engineering question, and the answer depends on what type
of fit you require. Various fits are defined…

RC = Running or Sliding Clearance Fit

Briefly: Running and sliding fits are intended to provide accurate
location with free relative motion.

LC = Locational Clearance Fit

Briefly: Locational fits are fits intended to determine only the
location of the mating parts; they may provide rigid or accurate
fits, or provide some freedom of location, as with clearance fits

LT = Transition Clearance or Interference Fit

Briefly: Locational clearance fits are intended for parts which are
normally stationary, but that can be freely assembled or disassembled

LN = Locational Interference Fit

Briefly: Locational interference fits are used where accuracy of
location is of prime importance, and for parts requiring rigidity and
alignment with no special requirements for bore pressure. Such fits
are not intended for parts designed to transmit frictional loads from
one part to another by virtue of the tightness of fit. These
conditions are covered by force fits.

FN = Force or Shrink Fit

Briefly: Force or shrink fits constitute a special type of
interference fit, normally characterized by maintenance of constant
bore pressures throughout the range of sizes. The interference
therefore varies almost directly with diameter, and the difference
between its minimum and maximum value is small, to maintain the
resulting pressures within reasonable limits.

Each of these are further subdivided into various classes.
Essentially it comes down to what you intend to do.

Regards, Gary Wooding