Overview

This article explains how the Settings & Assumptions > Taxes options for regular assets flow through to the Year at a Glance (YAG) report — and how MaxiFi determines what portion of asset returns are taxed as:

  • Qualified dividends / realized capital gains

  • Unrealized capital gains

  • Ordinary asset income (interest, etc.)

We’ll walk through an example below to show how these settings translate into the YAG.

QUICK USE GUIDE

Regular Asset Taxation Settings

Go to: Settings & Assumptions  > Taxes > Regular Asset Taxation

You’ll see three key percentages under:

Assumptions About Income from Regular Assets (Apart from Munis)

  • Qualified Dividends & Realized Capital Gains %

  • Unrealized Capital Gains %

  • Share of Interest and Other Ordinary Asset-Income %

These three categories determine how your total annual return is allocated for tax purposes.

Example Assumptions

For the below scenarios, assume:

  • Beginning regular assets: $100,000

  • Inflation: 2.25%

  • Nominal return: 4.75%

  • Total return = $4,750

That $4,750 must be allocated across the three categories above.

Scenario 1: 100% Ordinary Asset Income

If the settings show:

  • 0% Qualified Dividends / Realized Gains

  • 0% Unrealized Gains

  • 100% Ordinary Income

Then the full $4,750 is treated as ordinary taxable income.

In the YAG report, this appears as:

  • Taxable Asset Income = $4,750

  • No capital gains entries

Scenario 2: 50 / 50 Split Between Qualified Dividends and Ordinary Income

If you adjust the settings to:

  • 50% Qualified Dividends / Realized Gains

  • 0% Unrealized Gains

  • 50% Ordinary Income

Then:

  • $4,750 × 50% = $2,375 Qualified Dividends

  • $4,750 × 50% = $2,375 Ordinary Income

The total income subject to tax is still $4,750 — it’s simply divided between categories.

Scenario 3a: 30 / 40 / 30 Allocation

Now let’s use:

  • 30% Qualified Dividends / Realized Gains

  • 40% Unrealized Gains

  • 30% Ordinary Income

The $4,750 return is allocated as:

  • 30% → $1,425 Qualified Dividends

  • 40% → $1,900 Unrealized Gains

  • 30% → $1,425 Ordinary Income

NOTE: You do not see Net Realized Capital Gains yet. That’s because realized gains are triggered only when there is a withdrawal from regular assets. In this example year, there is saving, not a withdrawal.


The $1,900 of unrealized gains is not ignored — it is added to MaxiFi’s internal tracking of accumulated unrealized gains (just like in a brokerage account).

Scenario 3b: When a Withdrawal Triggers Realized Gains

Now we adjust the plan so there is a withdrawal from regular assets.

The distributed income remains:

  • $1,425 Qualified Dividends

  • $1,425 Ordinary Income

Total taxable asset income is still $4,750.

However, now you’ll see:

How are Net Realized Capital Gains calculated? 

Here’s the simplified logic:

Unrealized gains for the year = $4,750 × 40% = $1,900

These unrealized gains are part of the total taxable asset base:

$100,000 starting balance

  • $4,750 total return

    = $104,750 taxable asset base

Now calculate the proportion:

$1,900 ÷ $104,750 = 1.81%

This means 1.81% of any withdrawal represents realized capital gains.

If the withdrawal is:

$17,538 × 1.81% = $318 realized gains

That’s what appears as:

Net Realized Capital Gains = $318

MaxiFi prorates realized gains based on total accumulated unrealized gains relative to total assets subject to tax.

Important Notes

Reserve Funds

Regular assets marked as Reserve Funds:

  • Default to generating only ordinary income

  • Do not generate capital gains or qualified dividends

You can modify this via:

  • Settings & Assumptions  > Taxes > Reserve Fund Taxable Percentage

  • Settings & Assumptions > Safe Returns (to 0% if desired)

These settings are independent of the three regular asset allocation percentages.

Unrealized Capital Gains Balance

Realized gains calculations include:

  • Unrealized gains generated this year

  • All unrealized gains carried forward from prior years

Municipal Bonds (Munis)

Assets invested in tax-free municipal bonds:

  • Are excluded from taxable regular asset income

  • Affect the allocation calculations

These are controlled by: Municipal Bonds (Munis) Percentage

Key Takeaways

The three allocation percentages in Settings & Assumptions > Taxes determine:

  1. How total return is categorized

  2. What shows up as taxable income immediately

  3. How much unrealized gain is tracked

  4. How much is realized when withdrawals occur

The YAG report reflects these mechanics directly.

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