After-Tax Return


DEFINITION of 'After-Tax Return'

The return on an investment including all income received and capital gains, calculated by taking expected or paid income taxes into account. Generally reserved for returns on positions that have been closed out or sold, after-tax returns are also used to evaluate the after-tax yields of municipal versus corporate and government bonds because municipals are free from federal income taxes.

BREAKING DOWN 'After-Tax Return'

After-tax returns serve to level the playing field, breaking down performance data into "real life" form for the individual investor. Investors in the highest tax brackets will often look to investments, such as municipals and high-yielding stocks (dividends are taxed at a lower rate than capital gains) to aid in boosting after-tax returns. People who trade stocks frequently are subject to the highest tax rates on capital gains, and after-tax returns will suffer unless the investor makes very profitable trades.

  1. Pretax Profit Margin

    A company's earnings before tax as a percentage of total sales ...
  2. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  3. Capital Gains Treatment

    The specific taxes assessed on investment capital gains as determined ...
  4. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  5. Ordinary Income

    Income received that is taxed at the highest rates, or ordinary ...
  6. Federal Tax Brackets

    Income tax groupings specified by the Internal Revenue Service ...
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