CD Tax Calculator
Don't forget the IRS. This tool helps you see the impact of your tax bracket on your CD returns, showing you the real 'take-home' value of your savings.
How is interest on a CD taxed?
In the US, interest earned on a Certificate of Deposit (CD) is generally considered taxable income in the year it is earned, even if the CD hasn't matured yet. It is usually taxed at your ordinary income tax rate.
What is "After-Tax Yield"?
After-tax yield is the actual return you keep after paying taxes on the interest. It is calculated as: Nominal Rate ร (1 - Tax Rate). For example, a 5% CD for someone in a 24% tax bracket has an after-tax yield of 3.8%.
Do I pay taxes every year on a multi-year CD?
Yes. Even if you don't withdraw the interest, banks typically issue a 1099-INT form every year for the interest credited to the account, and you must report this on your annual tax return.
How can I reduce the tax on CD interest?
Investing in CDs through tax-advantaged accounts like a Traditional IRA or Roth IRA can defer or eliminate taxes on the interest earned. This calculator, however, focuses on standard taxable brokerage or bank accounts.