Roth IRA Gains Calculator
Measure how much capital gains tax a Roth IRA saves compared with holding the same investment in a taxable brokerage account.
Investment Details
Model your portfolio growth and tax impact
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Roth IRA vs Taxable Account at Liquidation
Capital Gains Growth Over Time
How the Gains Comparison Works
The calculator grows the same one time investment in two places. In the Roth IRA, every dollar of growth stays invested and is never taxed.
In the taxable account, part of each year’s growth is taxed as it is realized through dividends and fund distributions. When you finally sell, the remaining gains are taxed too.
Enter the investment
Use the amount invested and how many years you plan to hold it.
Set your return
The same annual return applies to both accounts before taxes.
Add federal and state rates
Your combined capital gains rate drives the annual tax drag and the final sale tax.
What Is the Formula?
The Roth side is simple compound growth. The taxable side assumes about 30% of each year’s gain is realized and taxed, a typical level for diversified funds.
- I : Amount invested
- Your one time investment in either account.
- r : Annual return
- Yearly growth before any taxes.
- n : Holding period
- Years until you sell or withdraw.
- τ : Combined rate
- Federal plus state capital gains tax rate.
The Effective Tax Drag card is a quick estimate of how much of your return the taxable account loses to yearly and final taxes at your combined rate.
Taxes Avoided on $50,000 by Holding Period
The longer you hold, the bigger the tax gap becomes. This chart uses a $50,000 investment, a 10% return, and a 20% combined rate (15% federal, 5% state).
| Years held | Roth IRA value | Taxable after tax | Taxes avoided | Share of Roth value |
|---|---|---|---|---|
| 5 | $80,526 | $72,683 | $7,843 | 9.7% |
| 10 | $129,687 | $108,228 | $21,460 | 16.5% |
| 20 | $336,375 | $251,216 | $85,159 | 25.3% |
| 30 | $872,470 | $602,352 | $270,118 | 31.0% |
Example: $50,000 Held for 20 Years
These are the calculator’s default inputs, a common scenario for a long term index fund investor.
- 1Roth IRA: $50,000 × 1.1020 = $336,375, with $286,375 of tax free gains.
- 2Taxable, year one: $5,000 gain, of which 30% is taxed at 20%, costing $300 and leaving $54,700.
- 3After 20 years the taxable account reaches $301,520. Selling triggers 20% tax on $251,520 of gains, or $50,304.
FAQs
No, selling investments inside a Roth IRA never triggers capital gains tax, no matter how large the gain.
No, losses inside a Roth IRA cannot be deducted against your other income or gains.
It assumes about 30% of each year’s growth is realized through dividends and fund distributions, with the rest taxed when you sell.
Yes, most states tax capital gains as ordinary income, so adding your state rate gives a truer comparison.
No, you can sell and buy within a Roth IRA as often as you like without owing tax.
Gains taken in a qualified distribution are tax free, but earnings withdrawn early may face income tax and a 10% penalty.
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