Non-retirement Accounts

Taxable, Tax-Free and Tax Efficient Accounts

The calculator on this page looks at taxable and tax-exempt non-retirement investments. The calculator at this page provides the federal short term and long term gains marginal tax rates which you need for the calculator that follows.  Please consult your state government tax web pages for state rates.

We calculate the value of a one-dollar investment in tax-exempt municipal securities which are federally exempt or federal as well as state exempt, in taxable investments in bonds, stocks and mutual funds and employee stock ownership plans (ESOP).

This calculator requires the dividend return as a percent of total return, qualified dividends as a percent of the total dividend and the federal and state short and long term tax rates. As noted earlier, look at this page for details on your long and short term rates. If a $1000 investment is worth $1100 a year later and the annual dividend was $40 then the dividend return as a percent of the total return is 40%. A qualified dividend is awarded on domestic and qualifying foreign assets held for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. It is taxed at the long term rates (as opposed to the short term rates for ordinary dividends- see tax publication 550 for further details) and thus needs to enter the calculations. Mutual fund annual capital gains distributions are also taxed at the long term rates. For our example, if $20 of $40 were qualified dividends (plus mutual fund annual capital gains distributions which are taxed at the same rate as qualified dividends) then the qualified dividends/distributions as a percent of total dividends are 50%. Look for these numbers in your annual bonds and stock and mutual fund statements. Enter typical data over a number of years.

There are four default scenarios as well in this second calculator. You can alter the blue cells and enter your own scenario. The first scenario looks at a municipal bond fund with a return of 4.5%, a 60% dividend as a percent of the typical return and 70% as qualified dividends. One dollar now is worth $2.1 in 18 years for a federal and state tax-exempt fund and $1.82 for a fund that is only federally exempt.

The second scenario looks at a taxable mutual fund returning 6%, a 10% dividend as a percent of total return and 50% qualified dividends. One dollar is worth $2.33 in 18 years. The third scenario looks at a taxable high dividend yield mutual fund returning 6%, 40% dividend as a percent of total return and 50% qualified dividends. One dollar is worth $2.01 in 18 years.

Employee stock ownership plans (ESOPs) typically allow one to purchase company stock at a discount.  If the stock is held long term most of the dividends can be assumed to be qualified dividends. Scenario four looks at an ESOP discounted to 85% of the original value, a 30% dividend as a percent of total return and 90% qualified dividends. One dollar is worth $2.75 in 18 years.

Edit the blue cells in the spreadsheet and enter your data and the calculations will refresh.

Bookmarks from my daughter --- Christmas 2017

Bookmarks from my daughter — Christmas 2017