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After-tax (brokerage) accounts
After-tax (brokerage) accounts

This article describes how to enter your After-Tax Accounts.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

Brokerage Accounts

Create an Account

Brokerage accounts are set up in the same manner as your tax-advantaged accounts, with the ➕, but you’ll select Capital Gains as your tax treatment.

Step 1: Open the Savings section.

Step 2: At the bottom of your listed accounts, press "Add an account +"

Step 3: Toggle to "Taxable" and select that this is an Investments/Savings/Checking account

Step 4: Choose if you would like to link the account or manually enter the account info (we will be choosing "Manual Entry" for the purposes of this demonstration)

Step 5: Enter a descriptive account name

Step 6: Enter the current balance

Step 7: Select Capital Gains as the tax treatment

Step 8: Enter the Optimistic and Pessimistic growth rates

Step 9: Enter an accurate cost basis.

Your cost basis is the original investment amount for tax purposes. This is usually the purchase price, adjusted for stock splits, dividends, and return of capital distributions.

Step 10: Enter the turnover rate

Capital gains are not taxed until they are realized, and this isn’t an issue in your retirement accounts (they have zero cost basis.) Gains in after-tax accounts are taxed at preferential or lower capital gains rates and not ordinary income rates. The brackets are 0%, 15% and 20% and depend on your taxable income. You may incur capital gains taxes in a taxable account, when you 1) sell shares, and when 2) there is internal buying and selling in the account.

You’ll use the turnover rate to represent any internal buying and selling within the account. The tool will take the account balance and cost basis, realize that percentage of gains, and tax them at your Long Term Capital Gains rate. If you are a passive investor, holding ETFs or index funds, the turnover rate will be low or negligible. If you have a managed portfolio, managed fund, or trade frequently the turnover rate will be higher, maybe 20% or more. See below if you need guidance in determining your turnover rate.

Step 11: Determine if you want to add contributions to the account. If yes, head over to Money Flows.


How do you calculate your Turnover Rate?

You’ll find the annual capital gains distributions on your 1099 DIV and/or IRS Form 1040. Divide the annual capital gains distributions by the prior year-end account value to determine the annual turnover rate

Example: capital gains distributions $3,000 ➗ $100,000 Account Value 3% Annual turnover rate.


Step 12: Account for reinvested dividends

Increase the Rate of Return by the dividend yield and enter the dividend yield in the Turnover Rate.

Charts

You may view your Realized Gains in the Insights > Taxes > Gross Taxable Income by Source Chart.


You may view your Capital Gains Tax Payments in the Insights > Income & Expenses > Estimated Expenses Chart.

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