After-Tax Return

After-Tax Return

The return on an investment after any applicable taxes on it are paid. For example, if one sells a house for $100,000 but owes $25,000 in taxes from the sale, the after-tax return on the house is only $75,000. The amount of the after-tax return may vary on the same investment depending on whether one owes income tax or capital gains tax. It should not be confused with the after-tax value, which is similar but is not contingent on the sale of an asset or the closing of an investment.
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The Gabelli Global Utility & Income Trust is a non-diversified, closed-end management investment company with USD68m in total net assets whose primary investment objective is to seek a consistent level of after-tax return for its investors with an emphasis on tax advantaged dividend income under current tax law.
The deal means that some two million New York homes will see their electricity and gas bills cut by about five per cent, while National Grid is allowed to make a 10.6 per cent after-tax return on its investment - considerably more than it makes from its assets in the UK.
Exhibit 2 assumes no deferral and investment of after-tax income with pretax earnings of 7%, or a 4.2% [7% x (1 - .396)] after-tax return (with earnings being compounded annually on the accumulated investment total).
Because dividends are entitled to a substantial exclusion from federal income taxes, these investments have a relatively high net after-tax return to the corporate investor.
Pre-tax and after-tax return on equity reach at 22.6 percent and 14.8 percent respectively; whereas pre-tax and after tax return on assets are at 1.5 percent and 1.0 percent respectively.
After-tax return on capital and return on equity for the year were 12.7% and 28.7%, respectively.
The after-tax return provides a gauge as to how well the portfolio is performing given the investor's specific circumstances.
Headline pre-tax profits were marginally lower at pounds 469 million, but that still generated an after-tax return on equity equivalent to more than 20 per cent a year.
An investor with a diversified portfolio invested in both retirement and taxable accounts must decide whether after-tax return is maximized when bonds are placed in taxable accounts and stocks in retirement accounts or vice-versa.
Pre-tax and after-tax return on average equity stood at 21.8% and 14.7% respectively.
However, tax-exempt interest from municipal bonds is not subject to the additional tax, so conservative investors looking to maximize after-tax return should consider increasing exposure to municipal bonds or municipal bond funds.
On the other hand, the after-tax return from munis may be higher after investors pay tax on taxable bond interest.