Investment Tax Center

Your investment decisions. Your tax consequences.

Did you know that taxes could consume more than 50 cents of every dollar earned by investors?

The good news is that some straightforward steps could help you bring that number down significantly.



Determine your actual tax rate

Assuming maximum for all tax brackets, it's fair to assume your AGI is high enough in order for the Limitation on Itemized Deductions (PEASE) to apply to you. This limitation effectively adds 1.18% to your marginal tax rate. This assumption is reflected in the output.
*required
*required

Your marginal tax rate on investment incomeC

Federal Income
Tax Rate
%
+
State Income
Tax Rate (Net)
%
+
Local Income
Tax Rate (Net)
%
+
Net Investment
Income Tax Rate
%
+
Itemized Deduction
Limitations
%
Top Tax Rate
On Investment Income†D
%

Your marginal tax rate on various types of income

Fixed Income

  • In-State Munis1

    %
    In-state munis are generally exempt from both federal and state taxes. Local taxes may still apply but are not factored in here.
  • Out-of-State Munis2

    %
    Out-of-state munis are generally exempt from federal taxes but not state and local taxes. Some out-of-state munis may also be exempt from state and local taxes depending on your state and the state of the bond you purchase.
  • U.S. Treasurys3

    %
    U.S. treasurys are generally exempt from state taxes but some exceptions may apply.
  • Other Fixed Income4

    %
    Other fixed income may include corporate bonds, floating-rate loans and other sovereign debt, among others.

Dividends

  • Non-Qualified Dividends5

    %
    Non-qualified dividends are dividends on common stock that are intended to be paid periodically in equal amounts over the course of a year, typically quarterly, after being declared by the issuer of the stock.
  • Qualified Dividends6

    %
    Qualified dividends are ordinary dividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at the higher tax rate for an individual's ordinary income.

Capital Gains

  • Short Term7

    %
    Short-term capital gains are those associated with an investment that was held for one year or less. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.
  • Long Term8

    %
    Long-term capital gains are those associated with an investment that was held for more than one full year. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.

Withdrawals From
Retirement Accounts

  • 401(k)9

    %
    401(k) withdrawals are treated as ordinary income. It is assumed that only pretax dollars were contributed, and the entire withdrawal is taxed. Withdrawals before age 59½ may be subject to an additional 10% penalty.
  • Traditional IRA10

    %
    A traditional IRA offers some tax advantages. Contributions made to a traditional IRA may be fully or partially deductible. Generally speaking, amounts in a traditional IRA (including earnings and gains) are not taxed until distributed. Withdrawals must begin after reaching age 70½.
  • Roth IRA11

    %
    A Roth IRA is generally not taxed if certain conditions are met. Contributions to a Roth IRA are not tax-deductible and can be made after reaching age 70½. Qualified distributions may be tax-free if certain requirements are satisfied.

Your taxable fixed income could be as high as 47.8%
and your rate on in-state munis’ could be as low as 0.0%.

Check out our Tax-Equivalent Yield Calculator to see how you could evaluate tax-advantaged municipal bonds.

Learn More

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Learn More About How Taxes Can Impact Your Investments

How can I evaluate tax-advantaged municipal bonds?

See how munis’ favorable tax status compares with taxable bonds of equal quality and maturity.

Calculate
Your After-Tax Yield Potential
How big is my portfolio’s tax burden?

See how potentially costly being “tax oblivious” can be and the potential value of tax-efficient investing.

Calculate
Your After-Tax Growth Potential
How can I prepare for rising interest rates?

See how laddered municipals may perform in an environment of higher taxes and rising interest rates.

Calculate
Your Laddered Bond Potential


The output of this calculator is for educational purposes only and should not be considered investment, legal or tax advice. The output is general in nature and may not apply to your individual tax situation and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.

For more individualized information, you should consult your tax advisor or investment professional. You bear sole responsibility for any decisions you make based on the output of this calculator. The calculator makes certain assumptions that may not apply to you. The calculator has many inherent limitations and individual results may vary.

Tax rates and tax laws are updated through October 1, 2014.

The displayed rates have been rounded to the nearest hundredth of a percent. The Top Tax Rate on Investment Income may not add up to the displayed rates due to rounding.

1 In-state munis are exempt from both federal and state taxes. Local taxes may still apply, but are not factored in here. Private Activity Bonds are subject to AMT, and if a taxpayer is subject to the AMT they would be subject to federal tax.

2 Out-of-state munis are exempt from federal taxes, but not state and local taxes. Some out-of-state munis may also be exempt from state and local taxes, depending on your state and the state of the bond you purchase. Private Activity Bonds are subject to AMT, and if a taxpayer is subject to the AMT they would be subject to federal tax.

3 U.S. Treasurys are exempt from state taxes.

4 Other fixed income may include corporate bonds, floating-rate loans and other sovereign debt, among others.

5 Non-qualified dividends are a dividends on common stock that are intended to be paid periodically in equal amounts over the course of a year, typically quarterly, after being declared by the issuer of the stock.

6 Qualified dividends are ordinary dividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at the higher tax rate for an individual's ordinary income.

7 Short-term capital gains are those associated with an investment that was held for one year or less. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.

8 Long-term capital gains are those associated with an investment that was held for more than one full year. Most states tax capital gains at the same rate as ordinary income, and that is assumed here. Some exceptions may apply.

9 401(k) withdrawals are treated as ordinary income. It is assumed that only pretax dollars were contributed, and the entire withdrawal is taxed. Withdrawals before age 591/2 may be subject to an additional 10% penalty.

10 A traditional IRA offers some tax advantages. Contributions made to a traditional IRA may be fully or partially deductible. Generally speaking, amounts in a traditional IRA (including earnings and gains) are not taxed until distributed. Withdrawals must begin after reaching age 701/2.

11 A Roth IRA is generally not taxed if certain conditions are met. Contributions to a Roth IRA are not tax-deductible and can be made after reaching age 701/2. Qualified distributions may be tax-free if certain requirements are satisfied.

 

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