What does the Taxable Account toggle do?

Monthly rotation strategies generate realized capital gains, and in a taxable account those gains get taxed. The Taxable Account toggle estimates after-tax returns so you can see how a strategy holds up once the IRS takes its share.

When you enable it, a settings dialog collects:

• Filing status - Single, Married Filing Jointly, or Head of Household
• Taxable income, after your standard or itemized deduction and including the gains you expect from this strategy. Capital gains stack on top of ordinary income when your brackets are determined, so leaving them out understates your rate.
• An optional manual override if you would rather enter your own short-term and long-term rates directly (useful for adding state tax)

From your filing status and income the model looks up your marginal ordinary-income rate and your long-term capital-gains rate using the 2026 federal brackets (IRS Revenue Procedure 2025-32), then adds the 3.8% Net Investment Income Tax if your income exceeds the NIIT threshold ($200K single or head of household, $250K married filing jointly). Those NIIT thresholds are fixed by statute and have never been indexed for inflation.

If you use the manual override, the rates you enter are used exactly as typed. No NIIT is added on top of them. If you are over the threshold and entering your own rates to capture state tax, include the 3.8% yourself.

How the tax is applied

The model charges each calendar year the tax it would actually have owed, built from what the strategy realized rather than what it earned on paper.

1. The FIFO lot simulation (see the Tax Efficiency FAQ) records what was sold each year and at what character.
2. Short-term realizations are charged your ordinary rate, long-term realizations your capital-gains rate.
3. Distribution income is charged separately every year.
4. Capital losses are pooled and carried forward indefinitely, offsetting the highest-rated gains first.
5. The resulting bill for the year is applied to that year's returns.

Gains you have not sold are not taxed. A position held across a year boundary is not a taxable event, so its gain carries forward untaxed and keeps compounding on the full balance. This is the entire tax argument for low turnover, and it is why a buy-and-hold allocation can show almost no tax drag while a monthly rotator shows a great deal.

The flip side: after-tax figures carry an embedded liability for anything still held. The Tax Profile panel reports that as Deferred (unsold). It is not charged, because you do not owe it until you sell, and under current law a step-up in basis at death may mean it is never owed at all.

Yields and distributions are taxed too

Interest and dividends arrive in cash whether or not you sell anything, and they get no holding-period benefit. Each ticker carries a published income character:

• Ordinary - Treasury and corporate interest, CLO and bank-loan income, REIT and managed-futures distributions. Taxed at your ordinary rate every year, with no long-term treatment ever.
• Qualified - ordinary equity dividends, taxed at your long-term rate.
• None - bullion trusts, box-spread funds, and non-payers, whose entire return arrives as price change.

This matters most for defensive sleeves. A strategy parked in BIL or TLT during Risk Off is earning interest, not capital appreciation, and is taxed accordingly. Rate-sensitive holdings track the prevailing short rate through history rather than a fixed yield, so cash sleeves are correctly shown earning almost nothing in the ZIRP years.

Gold is taxed differently

Physical bullion trusts such as GLD and SGOL are collectibles under IRC 408(m). Their long-term gains are taxed at the lesser of 28% and your ordinary rate, not at the 15% or 20% long-term rates. Short-term gains on them are unaffected.

This is not a flat 28%. At a $150K married-filing-jointly income it works out to 22%; only at higher incomes does the 28% cap actually bind. Where it does bind it is a meaningful penalty: 31.8% including NIIT against 23.8% for ordinary long-term gains.

SHNY is not treated this way. It is an exchange-traded note, so its holder owns an obligation of the issuer rather than an interest in bullion, and it blends at the ordinary long-term rates.

Why one month each year looks unusually bad

The tax for an entire year is applied to that year's last month, not spread across it. December absorbs the full annual bill in one figure.

This is worth knowing before you scan a monthly returns table with the toggle enabled. A December showing a steep loss after a strong year is not a data error, and it is not what that month actually returned. Annual and longer-period figures are unaffected by where the charge lands, so CAGR, drawdown, and every multi-year statistic remain correct.

Comparing against a benchmark

Only benchmarks with a known composition can be taxed. The 60/40 benchmark is modeled as 60% SPY and 40% BND, rebalanced each January, and is taxed accordingly - including ordinary-income tax on BND's interest. Index benchmarks such as the S&P 500 and QQQ have no underlying allocation to derive trades from, so they are left untaxed.

That means a strategy compared against one of those benchmarks with the toggle on is being shown after tax against a benchmark shown before tax. The gap is understated. Use the 60/40 benchmark when you want a like-for-like after-tax comparison.

A few other caveats worth knowing

• This is an estimate, not tax advice. Real-world results depend on your full tax picture, loss harvesting, and timing.
• The tax character is computed over the strategy's entire history, not the date range you have selected. Changing the range does not change the rate applied. The Tax Profile panel is window-scoped, so the two can show different figures for the same strategy.
• Strategies with less than 12 months of history cannot establish a tax character and are left untaxed.
• Federal only. No state tax is modeled. Use the manual override if you want to fold it in.
• The $3,000 annual capital-loss offset against ordinary income is not modeled. It is a fixed dollar amount and nothing here is denominated in dollars, so leaving it out is the conservative choice.
• Wash sales are not modeled, nor are the lot-selection choices a real investor or broker might make. FIFO is assumed throughout.
• Like the other toggles, it is global across all views and preserved in the page URL.

Use the ⚙ button next to the toggle to revisit your settings at any time.