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.


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RELATED FAQS
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    No. Withdrawals of your after-tax contributions to your IRAs should not be taxed. However, the only way to make sure this ... Read Answer >>
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    Aren't capital gains only payable when you sell the underlying security? I'm getting a 1099-Div form from my mutual ... Read Answer >>
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