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Discussion in 'Investing Glossary' started by Glossary, 26th Sep, 2006.

  1. Glossary

    Glossary Active Member

    12th Sep, 2006

    After-tax generally refers to the returns made on an investment once all taxes have been paid.

    While it is preferable to work with after-tax returns when comparing investments, the difficulty in doing so is that there are many factors which affect how much tax will be eventually paid on a return (such as losses carried forward from a previous year, capital losses, other deductions and taxable income, etc).

    In general, you can work out after-tax returns by considering your likely marginal tax bracket and subtracting the relevant tax rate from your returns.

    For example, if you made $1,000 income from an investment, and you are in the 40% tax bracket, then you are likely (subject to other taxable items and deductions) to be paying 40% tax on that income, or $400 - leaving you with an after-tax return of $600.

    Also known as:
    • Post-tax

    See also: