Calculator · Stage 2

ETF Tax Drag Calculator

See how much tax drag a fund generates annually in a taxable account, how that compounds over your holding period, and whether the fund belongs in taxable or tax-advantaged.

Educational tool only. Uses simplified assumptions. Actual tax drag depends on your specific tax situation, state taxes, and fund behavior in a given year.

Investment

Initial Investment ($)

Gross Annual Return (%)

Holding Period (years)

Fund Characteristics

Expense Ratio (%)

VTI: 0.03% · Active funds: 0.5–1.5%

Dividend Yield (%)

VTI: ~1.3% · Bond funds: 3–5%

Qualified Dividend (%)

US equities: ~90%. REITs/bonds: 0–20%.

Annual Turnover (%)

Index ETFs: 3–5% · Active funds: 50–100%

Tax Rates

Marginal Income Tax Rate (%)

Long-Term Capital Gains Rate (%)

Annual Tax Drag Breakdown

Gross annual return —

Expense ratio drag —

Dividend tax drag (qualified) —

Dividend tax drag (ordinary) —

Turnover / capital gains drag —

Total annual tax drag —

After-tax annual return —

Tax drag in basis points —

Compounding Impact

After — years on —

Pre-tax (no drag) ending value —

After-tax ending value (taxable) —

Tax-free ending value (Roth/no drag) —

Total drag cost over period —

* After-tax value includes liquidation tax on final gain at LTCG rate. Roth assumes same fund, zero drag, no exit tax.

Annual Drag Across Tax Brackets

Assumptions

· Turnover drag assumes average gain per sale = 15% of position value × turnover % × LTCG rate

· After-tax value: annual after-tax return compounded, then liquidation tax on (ending value − basis)

· Roth scenario: gross return minus expense ratio only, no tax on growth or exit

· State income taxes not included · NIIT (3.8%) not included unless selected

Tax-Aware Investing: Asset Location, TLH, ETF Efficiency →

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