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Pretax Rate of Return
(redirected from Pre-Tax Rate of Return)

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Pretax rate of return
Gain on a security before taxes.

Pretax Rate of Return
The rate of return on an investment before capital gains or other taxes. Most of the time, when one sees a calculation of the rate of return it is the pretax rate of return. For a tax-free investment, the pretax and post-tax rates of return are identical.


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Next, compare that scenario with rolling over the stock into an IRA, selling it tax-free inside the IRA, assuming a suitably higher pre-tax rate of return, and paying taxes on the mandatory distributions starting at age 70 1/2.
All else equal, a bank that holds a large amount of tax-advantaged securities may have a relatively low pre-tax rate of return but a relatively high after-tax rate of return.
Such an increase distorts the international pre-tax rate of return differentials and affects investors' decisions regarding where to invest.
 
 
 
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