This screen displays the increase in tax liability as the investment grows. |
This screen demonstrates the taxes paid, the cumulative taxes paid, and the cumulative taxes paid with opportunity cost. |
All compounding is performed annually. Net opportunity cost rate of return = Investment rate of return * (1 - tax rate). [The investment rate net of taxes.] The calculation is performed in a worksheet defined as follows: Column 1: Annual Investment at the beginning of the year. Column 2: Account balance at the beginning of the year. Column 3: Annual interest earned: (Column 2 * Investment rate of return). Column 4: Account balance at the end of the year: (Column 2 + Column 3). Column 5: Cumulative interest earned: (cumulative sum of Column 3). Column 6: Annual taxes paid: (Column 3 * Assumed Tax Rate). Column 7: Cumulative taxes paid: (cumulative sum of Column 6). Column 8: Account Balance at end of year minus cumulative tax: (Column 4 - Column 7). Column 9: Cumulative opportunity cost of tax: (previous year Column 9 * net opportunity cost rate of return + Column 6). Column 10: Account Balance at end of year minus cumulative opportunity cost of tax: (Column 4 - Column 9). |