After Tax Yield Calculator
A 5% yield is not really 5% once taxes take their cut. Enter the pre-tax yield plus your federal and state marginal rates to see the after-tax yield you actually keep.
Estimates only — not financial advice. This calculator gives approximate figures for planning. It is not financial, tax, or legal advice; check with a qualified professional before making decisions.
How the after tax yield calculator works
Interest from bonds, CDs, and savings is usually taxed as ordinary income. This calculator adds your federal and state marginal rates into one combined bite, then shrinks the pre-tax yield by that fraction. A 5% yield at a combined 29% marginal rate leaves 3.55% — the number that actually lands in your pocket.
That gap between pre-tax and after-tax is called tax drag. Comparing investments on an after-tax basis is the only fair way to choose between, say, a taxable bond and a tax-exempt municipal bond.
after-tax = pre × (1 − t) · tax drag = pre − after-tax
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After tax yield calculator FAQ
What is after-tax yield?
The return you keep after paying income tax on the earnings. A 5% CD taxed at a combined 29% marginal rate pays 3.55% after tax.
Should I use my marginal or effective tax rate?
Marginal — the rate on your next dollar of income — because it is the rate this particular yield will actually be taxed at.
What is tax drag?
The difference between the pre-tax and after-tax yield: the portion taxes eat. Lowering tax drag — for example with municipal bonds or retirement accounts — raises your real return.
Are municipal bond yields already after-tax?
Federal tax-exempt muni interest is generally free of federal tax (and sometimes state tax), so the quoted yield is close to the after-tax yield — which is why munis can beat higher-yielding taxable bonds.
Does this handle capital gains rates?
No. This calculator assumes the yield is taxed as ordinary income, like bond interest or CD interest. Qualified dividends and long-term gains use different rates.