Important Notice
These calculators are for educational and informational purposes only. Results are estimates based on the information you provide and should not be considered financial, tax, or investment advice. Your actual results may vary. For personalized guidance, please consult a qualified financial advisor, tax professional, or other appropriate expert.
People Also Ask
What is tax drag?
Tax drag is the reduction in investment returns caused by annual taxes on dividends, interest, and realized gains. A 7% return with 1% annual tax drag effectively becomes 6% growth.
How much does tax drag cost over time?
Over 30 years, 1% annual tax drag can reduce final value by 25% or more due to reduced compounding. The effect is exponential - small annual taxes create large long-term differences.
How do I minimize tax drag?
Use tax-advantaged accounts (401k, IRA, HSA) for tax-inefficient investments. In taxable accounts, use index funds (low turnover), tax-loss harvesting, and hold winners long-term.
Which investments have the most tax drag?
High-drag investments: bonds (interest taxed as income), REITs (ordinary dividends), actively managed funds (high turnover). Low-drag: index funds, growth stocks (no dividends), municipal bonds (tax-free).