After-Tax Return

Tax Planning
Updated Apr 2026 • Has calculator

The net investment return remaining after paying applicable income or capital gains taxes.

Tax laws change annually and vary by country. The information on this page is for educational purposes only. Always verify figures with current official sources (IRS, HMRC, CRA, ATO) and consult a qualified tax professional before making any tax-related decision.

What is After-Tax Return?

After-tax return is the actual return an investor keeps after paying taxes on investment gains, interest, or dividends. It equals the gross return multiplied by one minus the applicable tax rate. Comparing after-tax returns is essential when choosing between taxable and tax-advantaged accounts (Roth IRA, 401(k)), or between municipal bonds (tax-exempt) and taxable bonds. The after-tax return is always the relevant number for wealth building because only what you keep compounds.

Formula

After-Tax Return = Gross Return × (1 − Tax Rate/100)

Worked Example

Worked example — Taxable brokerage account vs Roth IRA — 2025

2025

Step 1  Gross annual stock return: 10.0%
Step 2  Taxable account: 24% federal + 5% state = 29% tax rate
Step 3  After-tax return (taxable) = 10% × (1 − 0.29) = 7.1%
Step 4  Roth IRA: 0% tax on gains = 10.0% after-tax return
Step 5  → Over 30 years, $100k grows to $1.75M in Roth vs $1.23M taxable

Source: CFA Institute — Fixed Income, 7th ed., Ch. 1 (2024-01-01)

Calculate After-Tax Return

Pre-tax annual return (e.g. stock return, bond yield)

Federal + state marginal rate on this type of income (e.g. 22% federal + 5% state = 27%)

After-Tax Return

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Not investment advice.

How to Interpret After-Tax Return

< 3
Low after-tax return — consider tax-advantaged accounts
3 – 5
Moderate — typical after-tax bond return
5 – 8
Good — healthy after-tax equity return
> 8
Excellent — strong return, favorable tax treatment

📚 Tax Basics — Complete the path

  1. Federal Income Tax
  2. Capital Gains Tax
  3. After-Tax Return
  4. Tax-Equivalent Yield
  5. Real Return
Sources
  1. CFA Institute — Fixed Income, 7th ed.
  2. Investopedia — After-Tax Return