Exclusion Ratio

DEFINITION of 'Exclusion Ratio'

The portion of the return on investments that is income tax exempt. It represents a payback of initial investments rather than capital gains.

BREAKING DOWN 'Exclusion Ratio'

The exclusion ratio arises mainly through different forms of non-qualified insurance annuities.

RELATED TERMS
  1. Payback Period

    The length of time required to recover the cost of an investment. ...
  2. PEG Payback Period

    A key ratio that is used to determine the time it would take ...
  3. Discounted Payback Period

    A capital budgeting procedure used to determine the profitability ...
  4. Exempt Income

    Certain types or amounts of income not subject to federal income ...
  5. Nontaxable Dividends

    Dividends from a mutual fund or some other regulated investment ...
  6. Qualifying Investment

    An investment purchased with pretax income. Money invested in ...
Related Articles
  1. Investing

    Payback Period

    Payback period is the time it takes for an investment to generate an amount of income or cash equal to the cost of the investment. The shorter the payback period, the better the investment is ...
  2. Investing

    Understanding The Discounted Payback Period

    It’s similar to a simple payback, but a discounted payback period accounts for money’s time value. It’s a more precise estimate of when investors will recover their total investment.
  3. Investing

    An Introduction to Capital Budgeting

    Firms use capital budgeting to determine if a project, like building a new plant or developing a new product, is worth pursuing.
  4. Personal Finance

    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.
  5. Retirement

    Maximize the Tax Benefit from Your Annuity

    Understand how nonqualified annuities are taxed during your lifetime, and how they are taxed when passed on to your beneficiaries.
  6. Retirement

    Immediate Annuities: More Income and Lower Taxes

    These instruments may shed their bad rap to bring you a hefty tax break.
  7. Retirement

    When Annuities Are the Wrong Investment

    Understand how annuities provide several unique benefits, but many drawbacks as well, and identify the situations where they are not the best investment.
  8. Personal Finance

    Comparing Long-Term vs. Short-Term Capital Gain Tax Rates

    Learn about the difference between short- and long-term capital gains and how the duration of your investment can impact your tax liability.
  9. Personal Finance

    8 States With Estate Taxes

    Understand the difference between the federal estate tax and state-specific estate taxes. Learn about some of the worst states with estate taxes.
  10. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
RELATED FAQS
  1. What are some of the limitations and drawbacks of using a payback period for analysis?

    Examine the payback period method of analyzing proposed capital investment projects, and learn about its advantages and disadvantages. Read Answer >>
  2. How do you find the break-even point using a payback period?

    Understand what a company's breakeven point is and what its payback period is. Learn why a company would want to track both ... Read Answer >>
  3. Is there a home tax exemption for my deceased spouse?

    I have to sell my home. I understand the $250,000 tax exemption. My wife recently passed away. Can I retain her tax exemption?  ... Read Answer >>
  4. How are non-qualified variable annuities taxed?

    Reduce your tax bill by knowing the tax advantages and disadvantages to owning or inheriting a non-qualified variable annuity ... Read Answer >>
  5. What is the difference between capital gains and investment income?

    Learn about the difference between capital gains and other types of investment income, such as dividends paid on stock or ... Read Answer >>
  6. What is the difference in tax liability between gross income and other kinds of income?

    Find out how the U.S. government taxes worker's earnings, whether it is gross income or income exempted or excluded from ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center