Tools · Taxes · Location, not allocation

Asset-location tax drag

Compare the annual tax on taxable-account bonds versus putting that sleeve in a traditional IRA and holding a stock index in taxable instead. Type your yield — the 4.2% default is an example, not today’s coupon. Primer: asset location. Paid sequence: implementation playbook. One-lot sale tax: capital gains.

Quick answer: This calculator estimates the annual tax drag of holding bonds and REITs in a taxable account versus parking that sleeve in a traditional IRA and holding a stock index in taxable. Yield, ordinary rate, NIIT, and state percent are yours.

The sleeve

Taxable bonds / REITs ($) Traditional IRA / 401(k) room ($) Bond / REIT yield % Stock index yield % (qualified) Years of this mix

Swap size is the lesser of the two dollar fields. Yields are yours. Do not paste a live Treasury or HYSA rate as if it were frozen.

The return this income sits on

Ordinary tax rate % LTCG / qualified rate % State tax % (applied to both sleeves) NIIT 3.8% (MAGI over the floor)

2026 LTCG 0% through taxable income $49,450 single / $98,900 MFJ; 15% through $545,500 / $613,700; then 20% (Rev. Proc. 2025-32). NIIT floors are not indexed. Most states have no LTCG break — type the rate that actually hits this sleeve.

Yearly location save

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Bond and REIT yield is taxed at ordinary + state + NIIT if you toggle it. Qualified dividends use the long-term rate you type plus the same state and NIIT. Ignores turnover, wash sales, munis, and ordinary tax on later IRA withdrawals — parking bonds in the IRA defers the 1099, it does not erase ordinary tax when you take the money. Educational only. Sequence: asset-location playbook.

What this means for you

What this means for you: the savings line is tax you do not pay this year on the bond yield if it sits in the IRA. The IRA does not erase ordinary tax when you later withdraw. Turnover, municipal bonds, and wash sales are ignored.

How to use this calculator

Open the Asset location calculator and keep the sample numbers or replace them with your own. The result updates as you type.
Read the headline figure first, then the breakdown or chart under it.
Use Copy share link if you want those inputs in the URL. The page is an educational estimate, not a filing, approval, or recommendation.

FAQ

What is asset location?

Which account holds which investment, separate from which mix of stocks and bonds you own.

Why do bonds move to the IRA in this model?

The page taxes bond and REIT yield at ordinary rates plus state and NIIT when you toggle them. A stock index uses the long-term rate you type.

Does the IRA make bond interest tax-free?

No. The page says parking bonds in the IRA defers the 1099 and does not erase tax on a later withdrawal.

Educational, not financial advice. Page updated October 24, 2026 — no tax, limit, or rate figure was changed in this review.