After-tax mutual fund and ETF returns

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Bitzer
Posts: 210
Joined: Mon Apr 04, 2011 10:25 am

After-tax mutual fund and ETF returns

Post by Bitzer »

Is there a website that allows one to rank mutual funds and ETFs by after tax returns? This isn't my sole criteria to choose a mutual fund or ETF, but it is a consideration.

For example, I would like to rank Target Date 2030 mutual funds by both after tax on distributions returns and after tax after liquidation returns. I know that Fidelity and other websites list after tax returns, but they don't allow sorting by highest to lowest after-tax returns.

After some large 2021 mutual fund distributions (Vanguard 2030 is an example, perhaps, in part, due to extraordinary factors), I am more conscious of tax effects on distributions.

Thanks!
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: After-tax mutual fund and ETF returns

Post by sycamore »

Bitzer wrote: Thu Aug 11, 2022 7:30 am Is there a website that allows one to rank mutual funds and ETFs by after tax returns? This isn't my sole criteria to choose a mutual fund or ETF, but it is a consideration.

For example, I would like to rank Target Date 2030 mutual funds by both after tax on distributions returns and after tax after liquidation returns. I know that Fidelity and other websites list after tax returns, but they don't allow sorting by highest to lowest after-tax returns.

After some large 2021 mutual fund distributions (Vanguard 2030 is an example, perhaps, in part, due to extraordinary factors), I am more conscious of tax effects on distributions.

Thanks!
Morningstar has something like what you want with their portfolio view. They show a "tax cost ratio" measurement. Maybe they also show the after-tax return, I'm not sure.

However, it appears M* is slowly reducing the features available for their free/basic accounts and the portfolio view won't be available much longer.

Also, Morningstar -- like any other site that reports after-tax returns or tax cost -- has to decide what tax rates to apply to the before-tax returns. Do they use the very top bracket, the lowest bracket, one of the a middle brackets? Which state tax bracket would they use? Do they account for loss of tax credits if the distributions are too much? Etc.

In all likelihood whatever tax brackets they choose will not match your own tax brackets and your tax situations, making the any after-tax calculations somewhat dubious. Not to dissuade you from trying to use such reporting, just be aware of the limitations.
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: After-tax mutual fund and ETF returns

Post by sycamore »

Also meant to add:

1) Take a look at the Tax Efficiency 2021 thread. It's not about after-tax returns per se but it does have a spreadsheet that lets you calculate the tax impact of actual funds using your actual tax bracket info. It's not a comprehensive tax solution but it's pretty good for what it does.

2) The 2021 Vanguard Target Date capital gain distribution fiasco was very likely a one-time event. Personally I expect the funds to return to their more normal distribution rate range for 2022 and later. You can get each Target fund's distribution history (past 10 years) at the Vanguard advisors site. E.g., for 2040 fund, go to https://advisors.vanguard.com/investmen ... -2040-fund, click on "Price & distributions" and scroll down and click on "Export distribution data".
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grabiner
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Re: After-tax mutual fund and ETF returns

Post by grabiner »

sycamore wrote: Thu Aug 11, 2022 9:57 am Also, Morningstar -- like any other site that reports after-tax returns or tax cost -- has to decide what tax rates to apply to the before-tax returns. Do they use the very top bracket, the lowest bracket, one of the a middle brackets? Which state tax bracket would they use? Do they account for loss of tax credits if the distributions are too much? Etc.
The standard assumption is the highest federal tax bracket and no state tax. The cost is also only the regular income tax, not the Net Investment Income tax of 3.8% that you would pay if you are paying the highest federal income tax.

In addition, Morningstar doesn't always know about qualified dividends; it's better to get tax data from the fund provider.
Wiki David Grabiner
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