Taxes

This section discusses the impact of tazes on the time value of money.

Usually, interest is taxable, so taxes reduce the rate of return (R) on our investment. They reduce the funds available for withdrawal.

Instead of using R in our formulae, we must now use $R_t$ to account for the impact of taxes.

If $t_r$ is the tax rate on interest,

$R_t = R*(1-t_r)$

Last updated 3 years ago

This section discusses the impact of tazes on the time value of money.

Usually, interest is taxable, so taxes reduce the rate of return (R) on our investment. They reduce the funds available for withdrawal.

Instead of using R in our formulae, we must now use $R_t$ to account for the impact of taxes.

If $t_r$ is the tax rate on interest,

$R_t = R*(1-t_r)$