How Do You Calculate After Tax Yield?
• Find the rate of return on your investment. We’ll call this RR. Investment brokers should provide this up front. • Calculate your total tax obligation rate, including both your federal income tax rate and your state income tax rate, if applicable to your investment. We’ll call this TT. Some investments are not subject to state income tax. Subtract the total tax obligation rate from your rate of return. The result is the after tax rate of return, or yield, on your investment. • Find out the total pre-tax yield dollar amount for your investment. We’ll call this PTYD. • Calculate your total tax obligation rate, which is the federal income tax rate + state income tax rate, if applicable. We’ll call this TT. • Multiply the pre-tax yield dollar amount by the total tax obligation rate: PTYD * TT. The result is the total tax obligation on the investment in real dollars. We’ll call this the RDTT. Subtract the total real-tax dollar amount from your pre-tax yield dollar amount: PTYD – RDTT. The
