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Capital Gains Taxes


Capital gains taxes in Advizr are calculated using Turnover Radio and Capital Gains Ratio

  • Turnover Ratio: percent of an account that is realized and taxed annually.
  • Capital Gains Ratio: percent of the portfolio taxed at long term capital gains rates rather than ordinary income.
  • To illustrate these concepts, an account worth $1,000,000 with a 5% turnover ratio and a 25% capital gains ratio would be taxed as follows: ($1,000,000 * 5%) = $50,000 of taxes of which 25% would be taxed at long term capital gains rates and the rest at the client's ordinary income rate.
  • Capital gains taxes are not displayed on the balance sheet as their own data point but you can calculate them by comparing an account's prior year ending balance + current year earnings + current year contributions – current year distributions to the current year ending balance. Any difference in the math is due to capital gains taxes.
  • Tip: If you want an account to be taxed at only long term capital gains rates, after you set your Turnover Ratio, set the Capital Gains Ratio to 100%.