The taxes toggle is the simulation assumption that decides whether a backtest deducts tax, or shows its results gross of tax. In the app it is the switch labelled Taxes, described as "Tax on dividends & realized gains" and shortened to "Taxes" in the assumptions summary. Like the other assumptions it switches what the same run is showing; the strategy and its history are untouched.
Also seen as: Taxes, taxation
What does turning taxes on change?
Turning Taxes on applies your saved tax settings to the run and deducts the resulting tax from its results. Those settings are your tax residency, your tax regime, the short-term and long-term capital-gains rates, and the dividend tax rate.
Two kinds of event are taxable, and one is not:
- Realized gains — a position closed at a profit is taxed at the applicable capital-gains rate.
- Dividends — dividend income is taxed at the dividend rate, applied to the dividend as received after any withholding tax at source.
- Open (unrealized) gains are not charged tax: no tax leaves the account for a holding you still own, however far it has risen.
Open gains still show in the after-tax figures, though. With Taxes on, the value a run reports each day is net of the tax the strategy would owe if it sold everything that day — the tax on its still-open gains together with the tax on what it has realized but not yet paid. So the after-tax curve reflects a gain's tax while the gain is still open, and selling the position does not suddenly cut the curve by that tax.
With the toggle off, the tax line is zero and every figure is gross of tax — dividends are credited in full, with no withholding at source either.
How does Fincanva handle it?
- Taxes are included from the Advanced plan. Free and Starter run every backtest with the assumption off and cannot turn it on; Advanced, Ultimate and Professional include it. See what each plan includes.
- Taxes is off by default, so the first figures you see are gross of tax.
- Flipping it switches the displayed result immediately, with no new run — the after-tax variant was pre-computed when the strategy ran (see simulation assumptions).
- The tax deducted appears as the "Taxes" band in the capital and P&L breakdown.
- The rates behind the toggle are saved settings: editing one is a settings change that takes effect only after the strategy runs again.
- The toggle is independent of the costs toggle — you can view a run after tax but before costs, or any other combination.
- The Positions view does not follow this toggle: it always reports with taxes off, one of its Positions forced assumptions.
What does it look like in practice?
One run, two views. With Taxes off a strategy's curve ends at a total return of +42.0%, gross of tax. Flip Taxes on and the same curve ends lower — say +34.8% — because the gains the strategy realized along the way were taxed at the capital-gains rate, each dividend was taxed at the dividend rate, and the final value sets aside the tax still owed on the gains open at the end. When that tax actually leaves the simulated account depends on the tax regime — as each gain is realized under Administered, once a year under Declarative and under United States and Other residency — rather than at the moment of every individual gain. The 7.2pp difference is not a different strategy or a different period: it is the same run with the tax that its trades and dividends would have triggered taken out. A strategy that realizes gains often meets that deduction more often than one that holds its winners.
The figures on this page describe what Fincanva models, not what you should do with your money — see Is this financial advice?.