Real Rate Of Return Formula & How To Calculate. The real rate of return can be calculated by subtracting the current or expected rate of inflation from the nominal rate of return on an investment.

If the nominal rate is 20% and the applicable tax rate is 15%, the after-tax return is 17%. The calculation is 0.20 x (1 - 0.15) . You can then adjust the 17% rate for inflation using the real ...

Tips to Improve After-Tax Real Rate of Return. If you want to make the most out of your real rate of return, it’s important to pay attention to the factors that affect it. Here are some simple tips on ...

Take a simple example. Say you start with $100,000 and earn a 5% after-tax nominal return over the course of a year. At the end of the year, your portfolio will be worth $105,000 after taxes.

Investors use rate of return to understand the earnings or losses on an investment in a specified period of time. Learn more about how it’s calculated.

Nominal vs. After-Tax Rate of Return . The after-tax rate of return of an investment takes the effect of taxation on the investment's returns into account.

For example, assume an individual achieves a 4.25% after-tax rate of return for stock ABC and is subject to a capital gains tax of 15%. The pretax rate of return is therefore 5%, or 4.25% / (1 - 15%).

To find the percentage of yield kept after taxes, subtract the total tax rate from 1. Using our previous example, subtracting 0.30 from 1 leaves 0.70. Step 4: Apply the After-Tax Return Formula ...

The nominal rate of return shows the yield of an investment over time without accounting for negative elements such as inflation or taxes. By calculating the nominal rate of return, you can ...

Subtract 1 and turn the result into a percentage, and that means that your real after-tax return was 5.77%. The key for investors is that if your real return is positive, then you're staying ahead ...

Take a simple example. Say you start with $100,000 and earn a 5% after-tax nominal return over the course of a year. At the end of the year, your portfolio will be worth $105,000 after taxes.