Tax-adjusted returns and tax cost ratio are estimates of the impact taxes have had on a fund. We assume the highest tax rate in calculating these figures. These returns follow the SEC guidelines for calculating returns before sale of shares. Click here to find out more.
For domestic stock funds, which report income that qualifies for a lower tax rate under the dividend tax cut enacted in 2003, we apply the lower rate consistent with that legislation. In practice, however, most fund companies do not specify if their distributions are eligible for this lower rate. Further NASDAQ, which supplies the raw daily data feed on distributions and NAVs for mutual funds, is not currently equipped to distinguish between income distributions that are eligible for the lower rate and those that are not. For funds that do not make such a distinction in their direct reports to us, we therefore must adjust their after-tax returns using the maximum federal rate. As a result, since most stock dividends qualify for a lower tax rate, some domestic stock funds with sizable yields may have understated after-tax returns in our system.