After-Tax Return

AAA

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.


INVESTOPEDIA EXPLAINS '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.


RELATED TERMS
  1. Pretax Profit Margin

    A company's earnings before tax as a percentage of total sales ...
  2. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  3. Capital Gains Treatment

    The specific taxes assessed on investment capital gains as determined ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Federal Tax Brackets

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

    Income received that is taxed at the highest rates, or ordinary ...
Related Articles
  1. Taxes

    After-Tax Balance Rules For Retirement Accounts

    Accumulating post-tax assets can work to your advantage. Find out how.
  2. Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  3. Credit & Loans

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.
  4. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.
  5. Taxes

    How Does An IRS Audit Work?

    It doesn't automatically mean an IRS agent will be ringing your doorbell. Here are the different types of IRS audits and how to handle them.
  6. Taxes

    What is the Effective Tax Rate?

    The effective tax rate is the average rate at which an individual or corporation is taxed per year.
  7. Taxes

    Made A Mistake On Your Tax Return? Don't Panic

    You can always file an amended return. But the sooner you do it, the better.
  8. Taxes

    Business Taxes: Not Paying More Than You Have To

    If you're a small business owner, note these potential tax deductibles so that you don't pay taxes that could have been extra revenue in your account.
  9. Taxes

    How To Arrange An Installment Agreement For Taxes

    Not enough cash on hand for your April 15th tax bill? No need to panic. Here's what to do.
  10. Taxes

    Are You Missing Out On These Tax Exemptions?

    To lower your tax bill, make sure that you're taking all the exemptions that apply to you.

You May Also Like

Hot Definitions
  1. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center