CD After-Tax Calculator \

How CD Interest Is Taxed

Banks report CD interest on Form 1099-INT each calendar year. For multi-year CDs, interest is taxable annually as it accrues — you do not get to defer it until maturity. Your marginal federal bracket determines the largest bite: at an illustrative 22% bracket, a 5.00% gross APY becomes roughly 3.90% after federal tax alone. Add a state income tax and the effective yield drops further, sometimes by half a percentage point or more depending on where you live.

The calculator applies both federal and state layers so you can see the net dollar amount of interest you keep each year. That net number is what actually matters when comparing a CD against alternatives like a Treasury bill or a high-yield savings account, because each product faces a different tax treatment. Enter your marginal brackets to see the after-tax yield specific to your situation.

Comparing After-Tax CD Yield to Alternatives

U.S. Treasury bills are exempt from state and local income tax, as documented by TreasuryDirect. That exemption can give T-bills an edge over CDs in states with meaningful income-tax rates. A CD yielding a gross 5.00% in a state with a 6% income-tax rate keeps roughly 4.40% after all taxes, while a T-bill at the same gross rate keeps about 4.60% because only federal tax applies.

The gap narrows or disappears in states with no income tax. Use the T-bill vs HYSA calculator for a direct after-tax comparison between Treasuries and deposit products. Enter your current marginal brackets in the calculator above to see the specific after-tax yield your CD produces — then judge whether the certainty of a locked rate compensates for the tax difference. On a $25,000 deposit, even a 0.20% after-tax yield improvement translates to roughly $50 per year, which adds up over a multi-year CD term.

Tax rates change with legislation and inflation adjustments. Enter your current marginal brackets for the most relevant estimate.