2026 tax year
Interest income tax calculator
Interest gets no special rate. A high-yield savings account is taxed exactly like your salary.
Interest from savings accounts, CDs, and corporate or Treasury bonds is ordinary income, no preferential rate, taxed at whatever bracket your other income puts you in. This shows the federal tax on your taxable interest and adds the 3.8% net investment income tax if your income is high enough. It also flags the two big exceptions: municipal and Treasury interest.
Savings, CDs, corporate and Treasury bonds. Exclude tax-exempt muni interest.
Treasury interest is state-exempt; enter it, but note your state won't tax it.
Enter your interest income and other income.
Worked example, $4,000 of interest on $80,000 of income
A single filer earning $80,000 has $4,000 of taxable interest from a high-yield savings account:
| Component | Amount |
|---|---|
| Taxable interest | $4,000 |
| Federal tax on it (ordinary rate) | $880 |
| Effective rate on the interest | 22.0% |
The $4,000 lands in this filer's 22% bracket, so it costs $880, the same rate their salary pays. There is no way to convert interest to a lower rate; the only lever is where you earn it (a muni bond, a retirement account) rather than how long you hold it.
Questions
How is interest income taxed?
As ordinary income, at your marginal rate, the same as wages, and unlike long-term capital gains or qualified dividends, which get lower rates. Your bank or broker reports it on Form 1099-INT, and the IRS receives a copy.
Is municipal bond interest taxable?
Interest on state and local municipal bonds is generally exempt from federal tax, don't enter it here. And often exempt from tax in your home state too. That exemption is why a lower-yielding muni can beat a higher-yielding taxable bond after tax, especially in a high bracket.
What about Treasury interest?
Interest on US Treasury bills, notes and bonds is taxable at the federal level but exempt from state and local income tax. So a Treasury and a bank CD of the same yield are not equal after tax if your state has an income tax, enter Treasury interest here for the federal figure, but it saves you the state tax a CD would owe.
Do I owe the 3.8% net investment income tax on interest?
Yes, above $200,000 of modified AGI (single) or $250,000 (joint). Taxable interest is net investment income, so it counts toward the 3.8% surtax. Municipal interest, being exempt, does not.
Related tools
- Dividend tax calculator qualified dividends get a lower rate
- Capital gains tax calculator long-term gains at 0/15/20%
- Quarterly tax calculator interest with no withholding
Estimate for the 2026 tax year. Pick a state to add its tax. But Treasury interest is state-exempt, so a state figure overstates it for any Treasury portion; muni interest is exempt from both. Not tax advice.