Find out how much of your investment return you actually keep. Split your expected return into interest, dividends and price growth, enter your tax rates, and see the after-tax annual return, the yearly tax drag and how a taxable account compares with a tax-deferred account and a Roth over time.
Last updated:
Investment
$
$
Added at the end of each year (after-tax dollars).
years
Expected return, split by type
% / yr
Bond interest, taxed as ordinary income.
% / yr
%
Qualified dividends get long-term capital gains rates.
% / yr
Capital appreciation.
%
Share of unrealized gains sold and taxed each year. Index funds: low; active funds: higher.
Tax rates (your marginal rates)
%
Your tax bracket. Add 3.8% NIIT if it applies to you.
%
US federal: 0%, 15% or 20%.
%
0 if your state has no income tax.
%
Expected bracket when you withdraw (state rate is added).
Enter your values to see the result.
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How to use the After-Tax Return Calculator
Enter the amounts: starting investment, yearly contribution and how many years you will hold.
Split the expected return into interest, dividend yield and price growth, and set how much of the dividend is qualified.
Set turnover, the share of gains realized each year (low for index funds, higher for active funds).
Enter your marginal tax rates: ordinary income, long-term capital gains, state, and your expected rate on retirement withdrawals.
Read the after-tax return and the account comparison, then check the year-by-year table and chart.
How after-tax return is calculated
Each part of the return is taxed at its own rate. With to = ordinary income rate, tcg = long-term capital gains rate and state tax added to both:
Price growth you don't sell is not taxed until you sell, so your money keeps compounding on it. That is why low-turnover funds are tax-efficient. The calculator follows your cost basis year by year, taxes realized gains as you go, and can tax the remaining gain at the end. It then turns the result into an annualized return (the internal rate of return of your contributions).
Where each type of return is taxed (US)
Return type
Taxable account
Traditional IRA / 401(k)
Roth IRA / Roth 401(k)
Bond and cash interest
Every year, ordinary income rate
Deferred, then ordinary rate on withdrawal
Tax-free if qualified
Qualified dividends
Every year, 0% / 15% / 20%
Deferred, then ordinary rate
Tax-free if qualified
Non-qualified dividends (REITs, most bond funds)
Every year, ordinary rate
Deferred, then ordinary rate
Tax-free if qualified
Long-term capital gains
When sold, 0% / 15% / 20%
Deferred, then ordinary rate
Tax-free if qualified
Short-term gains (held ≤ 1 year)
When sold, ordinary rate
Deferred, then ordinary rate
Tax-free if qualified
Rates reflect US federal rules as of 2026; brackets and thresholds are adjusted yearly. Higher earners may also owe the 3.8% net investment income tax. This is an estimate, not tax advice.
Tips to cut tax drag
Asset location: hold bonds and REITs (taxed at ordinary rates) in tax-deferred accounts, and broad stock index funds in taxable accounts.
Keep turnover low: every sale with a gain triggers tax; buy-and-hold funds defer it for years.
Hold over a year before selling, so gains are long-term and taxed at the lower rate.
Harvest losses to offset realized gains (watch the wash-sale rule).
Consider municipal bonds in high brackets; compare them with a tax-equivalent yield calculation.
Frequently asked questions
How do you calculate after-tax return?
After-tax return = pre-tax return × (1 − tax rate) for each part of the return, taxed at its own rate. Interest is taxed as ordinary income, qualified dividends and long-term gains at capital gains rates, and unrealized price growth is not taxed until you sell. Adding the after-tax pieces gives the after-tax return for the year.
What is tax drag?
Tax drag is the difference between your pre-tax and after-tax annual return. Taxes paid each year leave the account and stop compounding, so a 7% pre-tax return can become 5.5–6.5% after tax in a taxable account, depending on your rates and how the return is earned.
Why does the type of return matter?
Different income is taxed differently. Bond interest is taxed every year at your full income tax rate, qualified dividends at the lower capital gains rate, and price growth only when you sell. A low-turnover stock index fund is usually far more tax-efficient than a bond fund with the same total return.
Is a Roth or a traditional account better?
If your tax rate on withdrawals equals your rate today, a Roth and a traditional account give the same after-tax result when you invest the tax savings from the deduction. A traditional account wins if your retirement rate is lower, a Roth if it is higher. Both usually beat a taxable account because growth is not taxed each year.
What does grossing up traditional contributions mean?
A deductible contribution to a traditional account costs you less after tax. Grossing up invests the extra amount the deduction makes possible: $6,000 after tax equals $7,895 pre-tax at a combined 24% rate. Without it, the traditional account is compared on unequal terms.
What tax rates should I enter?
Use marginal rates, the rate on your next dollar of income. US long-term capital gains rates are 0%, 15% or 20% at the federal level, and higher earners may owe the 3.8% net investment income tax on top; add it to both rates if it applies. Brackets change each year, so check the current IRS figures for your filing status.
Does this include capital losses, fees or inflation?
No. The calculator assumes steady returns, reinvested income and no fees or losses. To see a real return after inflation, subtract the inflation rate from the after-tax return or use a real rate of return calculator.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.