What taxes do to an income portfolio
This is the part almost nobody shows. A strategy that earns 18% a year before tax can hand you 10% after it, and the gap is not a detail: over ten years it is most of the result. Here is where it goes, and how much of it comes back.
Why income is taxed harder than growth
On a distribution you pay tax on the whole amount, the day it arrives. On a sale you pay only on the gain, which after a few years is roughly half the value — so the effective cost is about half. An accumulating index fund pays almost nothing until you sell; an income portfolio pays every single month.
That is the honest starting point, and it is why this site shows both figures everywhere. But the gap can be reduced, and the next part is the one that matters.
Offsetting losses: the part that comes back
In Italy the income and gains of certificates and ETNs — the IncomeShares products, and some YieldMax ones — are "redditi diversi". A loss you realise can be set against them for the current year and the four that follow. Harmonised ETFs cannot do it: their income is "redditi di capitale", taxed in full whatever losses you carry.
How it works in practice
You sell what is at a loss and buy it straight back, at the same price. Nothing changes in your portfolio except that the loss is now realised and sits in your "zainetto fiscale", ready to absorb the tax on the next distributions.
What it costs
Two commissions for each sell-and-rebuy, and the risk that the price moves between the two orders. On our simulations the site charges both commissions, so the figures you see already include the cost.
What it gives back
On strategies full of eroding option-income products the recovery is worth several points a year. On a portfolio of harmonised dividend ETFs it is worth nothing, because those funds cannot use it.
Switch it on in your tax profile and every figure on the site is recalculated, strategy by strategy. Each strategy page then says in one line how many points the offsetting is adding — or would add, if you have it switched off.
Setting up your tax profile
It takes a minute and changes every number you will see afterwards. Nothing is sent to us: the profile stays in your browser.
- Pick your countryChoosing it fills in the usual rates. Every field stays editable, because your situation may differ from the standard one — and if your country is not listed, choose "Another country / custom rates" and type your own.
- Check the two main ratesTax on distributions, withheld when each payment arrives, and tax on capital gains, paid when a fund is sold at a profit. In Italy both are 26%.
- Add the yearly tax on the portfolio valueThe Italian stamp duty is 0.2% a year on the value of the account. Small, but it compounds against you.
- Set the reduced rate on government bondsItaly taxes white-list government bonds at 12.5% instead of 26%. We know the government share of part of our bond universe; where we do not, the ordinary rate is applied, which errs against you rather than in your favour.
- Decide on offsetting realised lossesThe checkbox described above. If you hold certificates and your broker works in "regime amministrato", it is usually worth having on.
- Enter your broker's commissionWhat you pay for one buy or one sell. It is applied to every trade in the strategies and in the simulator, which is why a strategy that rotates often looks worse here than elsewhere: because it is.
What we cannot do for you
- This is not tax adviceWe apply the rates you enter to the simulated history of each strategy. Your actual position depends on your broker, your residence and your whole portfolio, and only a qualified adviser can look at that.
- Rules changeRates and treatments are those in force when we last updated the country table. Check them against your own situation before relying on a figure.
- The simulation is not your accountIt applies the tax at the moment each distribution is paid and each position is sold, which is how an administered account behaves. A declarative regime works differently.