After-tax Cost of Debt Calculator
Compute r(1 - T) quickly
How to Use This Calculator
1
Enter pre-tax cost
Provide your company's pre-tax cost of debt as a percentage.
2
Enter tax rate
Use your marginal corporate tax rate as a percentage.
3
Click Calculate
See the after-tax cost of debt immediately.
Formula
After-tax Cost of Debt = r × (1 − T)
Where: r = pre-tax cost of debt, T = tax rate
Example: r = 6.5%, T = 30% ⇒ 6.5 × (1 − 0.30) = 4.55%
About After-tax Cost of Debt Calculator
This tool helps finance teams and analysts convert a pre-tax borrowing rate into an after-tax cost, reflecting the tax deductibility of interest expense.
When to Use
- WACC computations requiring after-tax debt costs
- Capital budgeting discount rate inputs
- Financing decisions comparing debt vs equity
Frequently Asked Questions
Why does tax reduce the cost of debt?
Interest expense is generally tax-deductible, reducing the effective cost paid after taxes.
Which tax rate should I use?
Use your marginal corporate tax rate applicable to interest deductions.
Is pre-tax rate nominal or effective?
Use an annualized effective rate for consistency with other WACC inputs.