Real Return After Tax Calculator
The order matters: take tax off first, then divide by inflation. 6% taxed at 20% is 4.8% after tax, and against 2.5% inflation that is 1.048 ÷ 1.025 − 1 = 2.244%. Simply subtracting gives 2.3%, slightly higher, because inflation eats the interest as well as the principal. At 2.244%, purchasing power takes 31.2 years to double.
Your numbers
Real rate
2.244%
Return after tax
4.8%
Years to double
31.2yr
Formula
Real rate = ((1 + Return after tax ÷ 100) ÷ (1 + Inflation ÷ 100) − 1) × 100
Taking tax before inflation is the part people reverse, and reversing it changes the answer. Put the rate that applies to interest or dividends in the tax field; in many countries tax falls on the whole nominal return, so you are taxed on the part that merely kept pace with prices — the usual reason real returns go negative when inflation runs high. For inflation alone with no tax step, use the real interest rate page.
What to enter
| Input | Default | Accepted range |
|---|---|---|
| Nominal rate (%)The quoted rate, before compounding is taken into account. | 6 | 0 ~ 60 |
| Tax rate (%)The tax rate that applies; it varies by country and item. | 20 | 0 ~ 60 |
| Inflation (%)How fast prices rise each year. | 2.5 | 0 ~ 40 |
Step by step
Quick reference table
Results when only Nominal rate (%) changes and everything else stays put.
| Nominal rate (%) | Real rate (%) | Return after tax (%) | Years to double (yr) |
|---|---|---|---|
| 3 | -0.098 | 2.4 | 0 |
| 4.5 | 1.073 | 3.6 | 64.9 |
| 6 | 2.244 | 4.8 | 31.2 |
| 9 | 4.585 | 7.2 | 15.5 |
| 12 | 6.927 | 9.6 | 10.3 |
What each result means
| Result | At default values |
|---|---|
| Real rate (%)The rate after inflation is removed — purchasing power. | 2.244 |
| Return after tax (%)The return once tax is out, before inflation is taken off. | 4.8 |
| Years to double (yr)Years for the principal to double if the rate holds. | 31.2 |
Common mistakes
Taking tax before inflation is the part people reverse, and reversing it changes the answer. Put the rate that applies to interest or dividends in the tax field; in many countries tax falls on the whole nominal return, so you are taxed on the part that merely kept pace with prices — the usual reason real returns go negative when inflation runs high. For inflation alone with no tax step, use the real interest rate page.
Glossary
- Nominal rate
- The quoted rate, before compounding is taken into account.
- Tax rate
- The tax rate that applies; it varies by country and item.
- Inflation
- How fast prices rise each year.
- Real rate
- The rate after inflation is removed — purchasing power.
- Return after tax
- The return once tax is out, before inflation is taken off.
- Years to double
- Years for the principal to double if the rate holds.
Frequently asked questions
Q. How is Real Return After Tax Calculator calculated?
Real rate = ((1 + Return after tax ÷ 100) ÷ (1 + Inflation ÷ 100) − 1) × 100 — The order matters: take tax off first, then divide by inflation. 6% taxed at 20% is 4.8% after tax, and against 2.5% inflation that is 1.048 ÷ 1.025 − 1 = 2.244%. Simply subtracting gives 2.3%, slightly higher, because inflation eats the interest as well as the principal. At 2.244%, purchasing power takes 31.2 years to double.
Q. Can you walk through an example?
With Nominal rate 6%, Tax rate 20%, Inflation 2.5%, the answer is Real rate 2.244%.
Q. What do I need to enter?
Enter Nominal rate, Tax rate, Inflation. The result recalculates as you type, and an empty box counts as zero.
Q. How much does the answer move if I change a number?
Changing only Nominal rate (%) moves the answer to Nominal rate (%) 3 → Real rate (%) -0.098 and Nominal rate (%) 12 → Real rate (%) 6.927. The table below lays out five steps.
Q. How are the numbers rounded?
Money is shown to the nearest whole unit, percentages to one decimal place and everything else to two. What you see is rounded; the calculation itself carries the unrounded value forward.
Q. Anything to watch out for?
Taking tax before inflation is the part people reverse, and reversing it changes the answer. Put the rate that applies to interest or dividends in the tax field; in many countries tax falls on the whole nominal return, so you are taxed on the part that merely kept pace with prices — the usual reason real returns go negative when inflation runs high. For inflation alone with no tax step, use the real interest rate page.
Related calculators
Tax rates and interest conventions differ by country and product — check your contract for real transactions.