Post-tax financing cost

Post-tax financing cost reflects the estimated financing expense after accounting for potential tax deductions. Financing fees associated with these strategies may be tax deductible if you itemize deductions, subject to IRS rules and limitations.

The post-tax financing cost shown assumes the highest marginal federal tax rate of 40%, and reflects the estimated tax benefit from deducting eligible financing expenses. This assumption is used for illustrative purposes only.

Financing costs may include: Margin loan interest and/or Stock borrow fees.

Actual financing costs can vary based on market conditions and borrowing rates.

Important tax considerations

• Financing costs are potentially deductible as investment interest expense only if you itemize deductions
• The investment interest deduction is typically limited to your net investment income
• Any disallowed interest may be carried forward to future tax years
• If you take the standard deduction, no tax benefit may apply
• The availability and value of deductions may be affected by alternative minimum tax (AMT) and state tax rules

How post-tax financing cost is calculated (with example)

Post-tax financing is calculated as follows: Pre-Tax Financing Cost × (1 – Assumed Tax Rate)

For example, our 140/40 strategy has a financing cost of 0.50%, but using a 40% marginal tax rate, the post-tax financing cost reduces to 0.30%. Calculation: 0.50% x (1 - 0.40%) = 0.30%

This calculation represents a simplified estimate of post-tax financing cost. Actual after-tax costs will vary based on individual tax circumstances, including income, deductions, and applicable tax laws.
We recommend consulting your tax advisor to understand how financing costs may apply to your specific situation.

This information is provided for educational purposes only and does not constitute tax advice. Post-tax financing costs and their impact may vary based on individual circumstances. You should consult your own tax advisor to understand the potential tax implications and post-tax cost of financing before making any decisions.