Real rate of return calculator (after inflation)

A real rate of return is what your money gained in purchasing power: the nominal return with inflation taken out. The exact formula is (1 + nominal return) ÷ (1 + inflation) − 1. At 7% a year with inflation of 3.39% — the average annual rise in the CPI-U from September 2016 to September 2026 — the real return is 3.49%, and 2.70% once a 15% tax is paid on the gain at the sale. The calculator above does it for your own numbers.

In short

• Real return = (1 + nominal) ÷ (1 + inflation) − 1. Subtracting (7% − 3.39% = 3.61%) overstates it.
• Capital gains tax is charged on the nominal dollar gain, so part of the tax falls on gains that only kept up with inflation.
• $10,000 at 7% for 10 years becomes $19,672 — worth $13,055 in today's dollars after a 15% tax.
• Prices (CPI-U) rose 39.6% over the 10 years to September 2026, according to BLS data.

How to use the calculator

Enter five numbers:

• Starting amount — one lump sum. It only scales the dollar results; the rates don't depend on it.
• Nominal yearly return — your actual annualized return (from the CAGR calculator or your broker) or an assumption, before inflation and tax.
• Inflation per year (average) — the default 3.39% is the annualized change in the CPI-U from September 2016 (241.428) to September 2026 (336.940). Use the average for the same years as your return.
• Years — the holding period.
• Tax on the gain when you sell — your own capital gains rate. Use 0 for an account where qualified withdrawals are tax-free, such as a Roth IRA, and see Roth IRA vs a taxable account for when that applies.

The headline result is the real yearly return after tax. Below it: the real return before tax, the "return minus inflation" shortcut for comparison, the nominal value at the end, the tax, the after-tax value in today's dollars, and the amount you would need at the end just to keep up with inflation.

The formula, step by step

The relationship between nominal and real rates is the Fisher equation. The exact form is 1 + real = (1 + nominal) ÷ (1 + inflation); economist Jesse Zinn argues for teaching it instead of the familiar shortcut real ≈ nominal − inflation, which ignores that inflation also erodes the year's gain.

With the defaults ($10,000, 7%, 3.39%, 10 years, 15%):

1. Nominal value: 10,000 × 1.07¹⁰ = $19,671.51.
2. Tax: 15% × (19,671.51 − 10,000) = $1,450.73. The IRS computes a gain as the amount realized minus your adjusted basis — in dollars, with no adjustment for inflation.
3. After tax: $18,220.79. Divided by 1.0339¹⁰ (= 1.3957), that is $13,055 in today's dollars.
4. Real yearly return after tax: (13,055.15 ÷ 10,000)^(1/10) − 1 = 2.70%.

Before tax, the real return is 1.07 ÷ 1.0339 − 1 = 3.49% a year. The last line, $13,957, is 10,000 × 1.0339¹⁰ — the same 39.6% rise in prices the CPI-U shows for those ten years (336.940 ÷ 241.428 = 1.3956).

Exact formula vs the shortcut

For a one-year holding at 7% with no tax, the shortcut is close at low inflation and drifts as inflation rises:

Inflation	Where the number comes from	Exact (Fisher)	Shortcut	Overstated by
2.0%	the Fed's longer-run goal (PCE)	4.90%	5.00%	0.10 pt
3.7%	CPI-U, 12 months to Sept 2026	3.18%	3.30%	0.12 pt
6.45%	CPI-U, Dec 2021 to Dec 2022	0.52%	0.55%	0.03 pt
10.0%	illustrative	−2.73%	−3.00%	0.27 pt

The gap is small at single-digit inflation, which is why the shortcut survives. It matters more over long periods, where 0.1–0.3 points a year compound, and in high-inflation years.

20201.4%

20217.0%

20226.5%

20233.4%

20242.9%

20252.7%

Computed from the BLS CPI-U index (not seasonally adjusted, 1982–84 = 100) via FRED. September 2026: 3.7% over 12 months.

Worked examples

Because the tax on a capital gain is paid once, at the sale, a longer holding period leaves more of the deferred tax compounding. Same inputs as the defaults (7%, 3.39% inflation, 15% tax):

Years held	After tax, in today's dollars	Real yearly return after tax
1	$10,248	2.48%
10	$13,055	2.70%
20	$17,656	2.88%
30	$24,352	3.01%

Without the tax every row would show 3.49%. The 1-year row is also roughly what a taxable account loses when the whole return is taxed every year, as with interest income — at whatever rate applies to it.

Where to get your nominal return

From your transactions, not the account balance. After you import your history, GetHossa shows a time-weighted return for any period and compares your portfolio with the S&P 500 on the same dates. Enter that figure here with the average inflation for the same years. To project growth with monthly contributions instead, use the compound interest calculator; for the latest CPI release and what drove it, see our September 2026 CPI report.

The calculator only does arithmetic on the numbers you enter. It does not forecast inflation or returns and is not investment or tax advice.