CD Tax Calculator
Calculate how much tax you'll owe on your CD interest. Understand CD taxation, estimate your tax liability, and plan for tax-efficient CD investing.
CD Details
Estimated marginal rate: 22%
Tax Summary
Tax Impact by Federal Tax Bracket
How CD Interest is Taxed
CD interest is taxed as ordinary income at both the federal and state levels. Unlike capital gains from stocks or bonds, CD interest doesn't receive preferential tax treatment. This means you'll pay taxes at your regular income tax rate.
Key Points:
- CD interest is reported on Form 1099-INT
- Taxed at your marginal tax rate (not capital gains rate)
- State taxes apply in most states
- Taxes are due in the year interest is earned
Use our CD tax calculator to see exactly how much tax you'll owe and plan accordingly.
Federal vs State Taxes on CDs
Federal Taxes
- Taxed as ordinary income
- Rates: 10% to 37%
- Based on your total taxable income
- Reported on Form 1040
State Taxes
- Varies by state (0% to 13.3%)
- No state tax: TX, FL, NV, etc.
- High state tax: CA, NY, HI
- Can significantly impact returns
Tax Brackets and CD Interest
Your CD interest is taxed at your marginal tax rate, which is the rate applied to your highest dollar of income. This means:
- If you're in the 22% bracket, all CD interest is taxed at 22%
- Higher income = higher tax rate on CD interest
- CD interest can push you into a higher bracket
- Consider tax-advantaged accounts for high earners
Use our calculator to see how different tax brackets affect your after-tax returns.
Tax-Advantaged CD Options (IRA CDs)
Traditional IRA CDs
Contributions may be tax-deductible, and interest grows tax-deferred until withdrawal in retirement. Withdrawals are taxed as ordinary income.
Roth IRA CDs
Contributions are made with after-tax dollars, but withdrawals in retirement (age 59½+) are completely tax-free. Ideal for long-term tax-free growth.
When to Consider IRA CDs
If you're in a high tax bracket (24%+) and have retirement savings goals, IRA CDs can significantly reduce your tax burden while maintaining FDIC insurance.
Tax Planning for CD Investors
1. Understand Your Tax Bracket
Know your marginal tax rate to accurately calculate after-tax returns. Use our calculator with your actual income to see real tax impact.
2. Consider State Tax Impact
State taxes can add 0-13% to your tax burden. If you're in a high-tax state, consider moving CDs to tax-free states or using tax-advantaged accounts.
3. Plan for Tax Payments
Set aside money for taxes on CD interest. Consider quarterly estimated tax payments if you have large CD investments to avoid penalties.
4. Use Tax-Advantaged Accounts
For retirement savings, consider IRA CDs to defer or eliminate taxes. This can significantly improve your net returns, especially for high earners.