Tax Drag

What is ‘Tax Drag’

The reduction of potential income due to taxes. Drag describes the loss in returns owing to taxation, usually on an investment. Tax drag is commonly used when describing the difference between an investment vehicle that is tax-sheltered and one that is not. For many individuals, tax drag can have a significant effect on overall investment performance.

Explaining ‘Tax Drag’

Tax-efficient investing techniques are very important for recognizing capital gains, transferring wealth and estate planning.

Further Reading