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Tools

Tax Alpha Estimator - Tool

Alexander Harmsen

Alexander Harmsen is the Co-founder and CEO of PortfolioPilot. With a track record of building AI-driven products that have scaled globally, he brings deep expertise in finance, technology, and strategy to create content that is both data-driven and actionable.

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Tax Alpha Estimator

Educational demo — not tax advice. Enter annualized inputs. Tax Alpha here represents the net drag from taxes on pre-tax return (so it will usually be negative). We show the blended after-tax return and, if you want, estimated dollar taxes.

Portfolio & flows

Pre-tax total return (expected)

%/yr

Realized capital gains each year (as % of portfolio)

%/yr

Only the portion you actually realize/recognize each year.

Dividend yield (as % of portfolio)

%/yr

Tax rates

Long-term gains tax rate

Common federal brackets are 0% / 15% / 20%. Add state/NIIT separately if relevant.

Dividend tax rate (qualified or blended)

Use your qualified rate or a blend if some dividends are ordinary.

Show dollar amounts

Estimated Tax Alpha

—

Negative = tax drag

After-tax return

—

Pre-tax return + Tax Alpha

$ tax cost (per year)

—

Toggle “Show dollar amounts” to enable

Visual (drag vs after-tax)

After-tax return portion Tax drag portion

Bar scales to your pre-tax return. If drag exceeds pre-tax (edge cases), after-tax floors at 0% and drag shows 100%.

Math (transparent)

—

Tax Alpha = −(Realized Gains% × Gains Rate + Dividend Yield% × Dividend Rate)
After-Tax Return = Pre-tax Return + Tax Alpha
All inputs are annualized percentages of portfolio value.

What the Tax Alpha Estimator Does

The estimator translates portfolio activity into an intuitive measure of “tax drag.” By inputting expected returns, realized gains, and dividend yield, users see how much of their return may be lost to taxes each year. For a hypothetical example, an 8% pre-tax return with moderate turnover and dividends might shrink to just over 7% after taxes.

This tool is not a forecast of investment performance. Instead, it is an educational way to see how taxes intersect with portfolio structure and turnover. The tool simplifies tax treatment and does not account for short-term vs. long-term differences, tax-loss harvesting, or changing laws.

Key Takeaways

Tax Alpha measures the impact of taxes on portfolio returns - usually negative, since taxes reduce growth.
The tool combines realized gains, dividends, and tax rates to show the effective after-tax return.
A simple visual illustrates what portion of pre-tax return is retained after taxes.
It can help investors understand why tax efficiency - such as minimizing unnecessary gains - can matter over time.

Breaking Down the Inputs

The estimator asks for a few key assumptions:

Pre-Tax Total Return (Expected): The baseline growth rate before taxes.
Realized Capital Gains (%): The portion of the portfolio sold and taxed each year.
Dividend Yield (%): The share of return distributed as dividends.
Tax Rates: Federal long-term gains and dividend rates applied to the inputs.

With these, the model calculates:

Tax Alpha: Net effect of taxes on pre-tax returns.
After-Tax Return: The growth rate actually retained.
Dollar Impact (optional): The annual tax bill in dollar terms.

Why It Matters for Investors

So what? Understanding tax drag makes it easier to compare strategies. A fund with high turnover may generate frequent taxable gains, while a lower-turnover option may defer taxes for longer. Over decades, that difference compounds into meaningful gaps in wealth.

The Tax Alpha Estimator does not recommend actions, but it does frame an important truth: pre-tax numbers rarely tell the full story.

This interactive analysis tool uses user-entered assumptions to illustrate the potential tax impact on investment returns. Results are hypothetical, for educational purposes only, and are not forecasts or personalized tax advice. The tool applies simplified annualized formulas using the inputs provided to estimate after-tax returns and “tax drag.” It does not account for short-term gains, loss carryforwards, changing tax laws, or state taxes. Actual outcomes will vary based on individual circumstances, and results will change if inputs change. This tool is not a recommendation for any investment or strategy.

How optimized is your portfolio?

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1: As of February 20, 2025

Global Predictions provides investment advice only through its internet-based application, PortfolioPilot, and only to individuals who are advisory clients of Global Predictions pursuant to written advisory Client Agreements ("Advisory Services"). The publicly available portions of the Platform (i.e., the sections of the Platform that are available to individuals who are not party to a Client Agreement - including globalpredictions.com and portions of portfoliopilot.com) are provided for educational purposes only and are not intended to provide legal, tax, or financial planning advice. To the extent that any of the content published on publicly available portions of the Platform may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Nothing on the publicly available portions of the Platform should be construed as a solicitation or offer, or recommendation, to buy or sell any security. All charts, figures, and graphs on the publicly available websites are for illustrative purposes only. Before investing, you should consider whether any investment, investment strategy, security, other asset, or related transaction is appropriate for you based on your personal investment objectives, financial circumstances, and risk tolerance. You are also encouraged to consult your legal, tax, or investment professional regarding your specific situation. Registration does not imply a certain level of skill or training. Investing involves risk. The value of your investment will fluctuate, and you may gain or lose money.

The contents of the Platform may contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about the financial industry, the economy, or Global Predictions itself. Forward-looking statements are not guarantees of the underlying expected actions or future performance and future results may differ significantly from those anticipated by the forward-looking statements. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Note: our use of the term AI refers to all artificial intelligence models used including large language models, proprietary economic models that incorporate regression or dynamic factors, and machine learning methods like supervised learning.

1. As of February 20, 2025
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2. As of February 20, 2025
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3. $30B Assets on Platform as of February 20, 2025. Aggregated across all plans (including the free plan). Assets on Platform represent the total value of connected and manually inputted accounts (including assets like real estate and private equity) and does not in any way represent Asset Under Management as Global Predictions does not manage any client funds.

4. Global Predictions Secures a Winning Spot in Internacional M6 Financial Forecasting Competition

5. Comparison made to an individual with $1M AUM, paying an "average wealth manager fee" of 1.02% based on a 2023 study by AdvisoryHQ. 1.02% * 1M = $10,200 per annum. PortfolioPilot Annual Gold pricing is $20/mo * 12mo = $240 per annum. 240/10,200 – 1 = ~98% lower. Actual fees paid to any individual financial advisor will depend on specific financial circumstances and arrangements.

7. The 1.94% referenced figure represents the average calculated monthly continuous tax-loss harvesting gain over a 4-year period from 2018-2021 in the 2024-published JP Morgan report titled "Continuous tax-loss harvesting yields more potential for tax savings" (link).

8. Case studies presented are hypothetical scenarios and intended for illustrative purposes only. They do not represent an actual client, investment or experience, but rather are meant to provide an example of the intended investment process and methodology. An individual's experience may vary based on his or her circumstances. There can be no assurance that the Firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the Firm's investment advisory services. The information contained herein should not be construed as personal investment advice.

9. The financial advisor described in this marketing language is referring to you, the reader. PortfolioPilot is meant to be an aid to the self-directed investor. "Complete financial advice" refers to the fact that PortfolioPilot includes estate planning, tax optimization, net worth visualization, and scenario modeling, not just investment recommendations. See globalpredictions.com/disclosures for descriptions of conflicts of interest, use of AI, bias, and any other disclosures for Global Predictions Inc.

10. This analysis is based on data from publicly available reports, academic studies, and articles. Sources include Mullainathan et al. (2012): Study highlighting biases in financial advice and its misalignment with client interests; Morningstar (2024): Report on typical update frequencies from financial advisors; Bodnaruk and Simonov (2014): Research on the limited impact of financial expertise on investment outcomes; Financhill: Insights on hidden fees in financial advising, including expense ratios and transaction costs, as noted by Warren Buffett; Foerster et al. (2014): Study on the costs of financial advice, including average AUM fees of 2.43%.

11. $11M number calculated as 2024 YTD TLH savings study conducted across 24,000 PortfolioPilot users on November 18, 2024.

12. Based on assumptions and projections that may not reflect actual outcomes.

Tax Alpha Estimator - Tool