Tax-Adjusted Yield
Real estate distributions are often partly sheltered from tax by depreciation. This tool estimates your after-tax yield and a taxable-equivalent yield for comparison.
How this is calculated
Depreciation can shelter part of a real estate distribution from current tax. The taxable portion equals the yield times the unsheltered share; your after-tax yield subtracts tax on that portion. The taxable-equivalent yield grosses the after-tax yield back up to what a fully taxable investment would need to pay to match it — useful for comparing a DST to a bond or CD.
Notes & assumptions
- The sheltered percentage is an estimate that varies by offering and over time.
- Sheltered income generally reduces your basis (it is often return of capital).
- This compares current yield only, not total return or risk.
Frequently asked questions
Why is real estate income partly tax-sheltered?
Depreciation is a paper expense that offsets rental income, so a portion of cash distributions may not be currently taxable — though it typically reduces your basis.
What is taxable-equivalent yield?
It's the pre-tax yield a fully taxable investment would need to pay to match this investment's after-tax yield — a way to compare across tax treatments.
How do I know my sheltered percentage?
It varies by offering and year and is estimated in a sponsor's materials. Your CPA can confirm the taxable versus return-of-capital split.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
This calculator is for educational estimation only and is not tax, legal, or investment advice. Results are approximate and depend on assumptions that may not fit your situation; confirm any figures with your own CPA and attorney before acting. Securities are offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.