After-tax Cost of Debt

Calculate the effective cost of debt after accounting for the tax deductibility of interest payments.

Last updated: 2026-06-21T07:59:18.033Z

Interest rate (%)

Corporate tax rate (%)

Total debt amount ($ optional)

Results

Enter interest and tax rates to compute after-tax cost.

About After-tax Cost of Debt

The after-tax cost of debt accounts for the tax deductibility of interest and is important for capital structure and WACC calculations.

Use this measure to compare financing options on an after-tax basis.

Enter the nominal interest rate and corporate tax rate.
Optionally provide debt amount to see absolute interest and tax savings.
Compare after-tax cost across financing options when planning capital structure.

Interest 6.5%, tax 21% → After-tax cost ≈ 5.14%.

Why adjust for taxes?

Interest is tax-deductible which lowers the effective cost to the firm.

Is WACC affected?

Yes — after-tax cost of debt is used when calculating WACC.

Does tax code change affect this?

Yes — changes to tax rates change the after-tax cost.

What about non-deductible interest?

Adjust calculations if interest is not deductible for tax purposes.

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