What works in the United States

Tactical asset allocation after tax in the United States: the rules of the Taxable account, Traditional IRA / 401(k), Roth, in plain words with sources, and what they cost 107 strategies over 2006 to 2026.

Version: 2.1
Published: 8 October 2026
Rules last checked: 22 October 2026

Taxable brokerage account

Every winning switch within a year is taxed at the income rate, but losses offset fully.

Tax cost a year (median): 1.9 pts
Median strategy, before / after tax: 8.9% / 7.1%
S&P 500 held, after tax: 10.1%
60/40 after tax (worst fall): 7.4% (-28%)

41 of 107 strategies beat a 60/40 after tax in this account with a smaller worst fall; 11 beat the S&P 500 held throughout. Returns a year, in USD.

The rules

Gains on funds held one year or less are taxed as ordinary income; held longer, at 0%, 15% or 20%. Our investor is a single filer in the 24% bracket (taxable income USD 105,700 to 201,775 in 2026): 24% and 15%, with no state income tax.
Losses offset gains, then up to USD 3,000 a year of other income; the rest carries forward without limit.
Wash sale: a loss is disallowed if the same fund is bought back within 30 days before or after the sale, and is added to the cost of the new shares. We apply it to the same fund only; the IRS has never said whether two ETFs on the same index count as the same.
Distributions are taxed every year: qualified dividends at 15% (fund held more than 60 days around the ex-dividend date), bond-fund distributions at 24%, REIT distributions at 24% less the 20% section 199A deduction.
Gold trusts such as GLDM are collectibles (long-term gains at the ordinary rate, capped at 28%). Commodity pools (DBA, GSG, UUP, UGL) are marked to market every 31 December and taxed 60% long term, 40% short term.
UCITS ETFs are PFICs for a US person and taxed punitively, so a US investor holds US ETFs. Leveraged ETFs are available.
A high earner (37% and 20%, plus the 3.8% net investment income tax) pays 3.1 points a year instead of 1.9. State taxes are not included (California, for example, taxes gains as ordinary income).

Confidence in these rules: high. Checked 22 October 2026. Sources: Rev. Proc. 2025-32 (2026 inflation adjustments, reflects OBBBA, Pub. L. 119-21); 26 USC 1222 (short-term vs long-term, net capital gain); 26 USC 1211(b) (capital loss limit for individuals).

Traditional IRA or 401(k)

Switching is free inside; the tax comes at withdrawal.

Tax cost a year (median): 0.0 pts
Median strategy, before / after tax: 8.9% / 8.9%
S&P 500 held, after tax: 11.1%
60/40 after tax (worst fall): 8.4% (-27%)

50 of 107 strategies beat a 60/40 after tax in this account with a smaller worst fall; 25 beat the S&P 500 held throughout. Returns a year, in USD.

The rules

Trades, dividends and gains inside are not taxed; withdrawals are taxed as ordinary income, with 10% extra before age 59 1/2.
Contributions are deductible. With the same tax rate when you put money in and when you take it out, the deduction and the tax at withdrawal cancel out, so the untaxed growth shown here is also the after-tax return. A lower rate in retirement makes it better, a higher one worse.
2026 limits: USD 7,500 a year in an IRA (shared with a Roth IRA), USD 24,500 in a 401(k).
Many 401(k) plans only offer a fixed menu of funds, not ETFs; check yours (some have a self-directed brokerage window).

Confidence in these rules: high. Checked 22 October 2026. Sources: 26 USC 408 (IRAs; 408(m) collectibles); IRS Publication 590-B (2025), Distributions from IRAs; IRS IR-2025-111 / Notice 2025-67: 2026 retirement plan limits.

Roth IRA or Roth 401(k)

Tax-free switching, for the part of your savings the limits let in.

Tax cost a year (median): 0.0 pts
Median strategy, before / after tax: 8.9% / 8.9%
S&P 500 held, after tax: 11.1%
60/40 after tax (worst fall): 8.4% (-27%)

50 of 107 strategies beat a 60/40 after tax in this account with a smaller worst fall; 25 beat the S&P 500 held throughout. Returns a year, in USD.

The rules

No tax on trades or distributions inside, and qualified withdrawals (after age 59 1/2 and 5 years) are tax-free.
Contributions are not deductible. 2026 limit: USD 7,500 a year in an IRA, shared with traditional IRAs, reduced for incomes from USD 153,000 (single filer).
A loss in a taxable account is lost for good if the same fund is bought in the Roth IRA within 30 days.

Confidence in these rules: high. Checked 22 October 2026. Sources: 26 USC 408A (Roth IRAs); IRS: Roth IRAs; Rev. Rul. 2008-5, IRB 2008-3 (wash sale via IRA or Roth IRA).

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How this was computed, the limits, and every other country are in the full study.