What is the difference between CD yield and CD rate?

The rate is the input the bank applies to your balance; the yield is the output you receive once compounding and the term have done their work. On a one-year CD compounding daily, a 4.10% rate produces a 4.185% yield. Regulation DD requires banks to advertise the APY precisely so savers compare yields rather than rates.

What is a good CD yield?

A competitive CD yield tracks short-term Treasury yields, because that is the bank's alternative source of funds. If the best CD you can find pays materially less than a Treasury bill of the same maturity, the bank is not competing for your deposit and it is worth looking elsewhere.

How is CD yield taxed?

As ordinary income, at your full marginal rate, in the year the interest is credited — reported on Form 1099-INT when it exceeds $10. There is no preferential rate as there is for qualified dividends or long-term capital gains, which is why the after-tax yield sits so far below the headline.

Does a higher yield always mean a better CD?

No. A higher yield paired with a longer term means you are locked in longer, and one paired with a harsher early withdrawal penalty means less flexibility if rates rise. Compare the yield first, then read the penalty and the renewal terms before deciding.

CD Yield Calculator

Turn a quoted CD rate into the yield you actually keep.

Turn a quoted CD rate into the yield you actually keep — over the term, annualised, and after tax.

At maturity: $53,106.31
Interest: $3,106.31

Your CD

Deposit amount

Interest rate

Rate is quoted as

Term length

1 year 6 mo

Common terms

Compounding frequency

Value at maturity: $53,106.31
Total interest earned: $3,106.31
Effective APY: 4.10%

$50,000.00 in a 1 year 6 mo CD at 4.10% APY, compounded daily, grows to $53,106.31 — that’s $3,106.31 of interest, averaging $172.57 per month.

Balance over the term

PrincipalInterest

View the figures as a table

Balance over the term
Month	Principal	Interest	Balance
At opening	$50,000.00	$0.00	$50,000.00
4mo	$50,000.00	$674.20	$50,674.20
7mo	$50,000.00	$1,185.81	$51,185.81
11mo	$50,000.00	$1,876.00	$51,876.00
14mo	$50,000.00	$2,399.75	$52,399.75
18mo	$50,000.00	$3,106.31	$53,106.31

Calculated in your browser using A = P(1 + r/n)^nt. Nothing is sent to a server. Figures are before tax; confirm exact terms with your bank.

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Formulas and content last reviewed July 21, 2026. Bank rates change frequently — confirm current rates directly with your institution.

The short answer

How do you calculate the yield on a CD?

A CD's yield is the interest it pays expressed as a percentage of the deposit, and there are three versions of it that get confused with one another. Total yield over the term is simply interest ÷ principal: a $50,000 CD at 4.10% for 18 months earns $3,171.34, a total yield of 6.343%. Annualised yield — the APY — restates that as a per-year figure so terms of different lengths can be compared, here 4.185%. After-tax yield subtracts what you owe, and for most savers it is the only one that describes reality: at a 24% marginal rate the same CD keeps $2,410.22, an after-tax APY of roughly 3.181%. The reason the distinction matters is that CD interest is taxed as ordinary income at your full marginal rate in the year it is credited, not at the long-term capital gains rate, so the headline yield on a CD is further from the yield you keep than on almost any other saving instrument.

Formula & method

How it's calculated

Yield = (A − P) / P

Total yield over the term. Annualising it gives the APY: (A/P)^(1/t) − 1.

A: Maturity value at the end of the term
P: Principal — your opening deposit
t: Term in years, used to annualise
APY: Annualised yield — the per-year rate the term-yield implies
τ: Your marginal tax rate; after-tax yield ≈ APY × (1 − τ)

Step by step

1
Compute the maturity value A with A = P(1 + r/n)^(nt).
2
Subtract the principal to get the interest the CD paid.
3
Divide by the principal. That is the total yield across the whole term.
4
Raise (A/P) to the power 1/t and subtract 1 to annualise it into an APY.
5
Multiply the APY by (1 − your marginal tax rate) for the after-tax yield.

Guide

How to use this calculator

Four inputs, live results. Nothing to submit and nothing to sign up for.

1
Enter your deposit and rate
Type the amount and the rate from the bank's rate sheet, setting the toggle to match whether they quoted an APY or a nominal APR.
2
Set the exact term
Yield is only comparable once it is annualised, and annualising needs the true term. A 13-month promotional CD is not a one-year CD.
3
Read the effective APY
The effective APY tile is the annualised yield. This is the figure to carry across to any other offer, whatever term it runs for.
4
Apply your tax rate
Multiply the APY by one minus your marginal rate. Compare that against a Treasury or municipal alternative, which are taxed differently.

Examples

Worked examples

Real numbers, worked all the way through — so you can sanity-check the calculator against your own figures.

An 18-month CD, shown as term yield, annual yield and after-tax yield

Deposit: $50,000
Rate: 4.10% nominal, compounded daily
Term: 18 months
Marginal tax rate: 24%

Interest earned: $3,171.34
Total yield over the term: 6.343%
Annualised yield (APY): 4.185%
After-tax yield: ≈ 3.181%

The three figures describe the same CD and differ by more than three percentage points. Quoting the 6.343% makes the CD look better than a one-year account paying 4.30%; annualising shows it is slightly worse. Always compare annualised.

Two offers on different terms, made comparable by annualising

Offer A: $50,000, 7-month promo at 4.60% APY
Offer B: $50,000, 18-month at 4.10% nominal

Offer A — interest: $1,329.08
Offer A — annualised yield: 4.600%
Offer B — interest: $3,171.34
Offer B — annualised yield: 4.185%

Offer B pays more than twice the dollars, and is the worse rate. That is the whole reason annualised yield exists. Offer A wins on yield but leaves you re-investing after seven months at whatever rate exists then — the trade-off the annualised figure cannot show you.

Methodology

Accuracy & assumptions

Every calculator makes assumptions. Here are ours, stated plainly, so you know exactly what the numbers do and do not account for.

The after-tax figure applies a single flat marginal rate to all the interest. Real returns straddle brackets, and state income tax is on top of federal.
Yield is calculated on the opening deposit. If you add to the CD, or if the bank pays interest out rather than compounding it, the yield on your average balance differs.
The rate is fixed and the CD is held to maturity. An early withdrawal penalty can push the realised yield below zero on a short holding period.
No fee is assumed. Maintenance fees on a CD are rare but not extinct, and they come straight off the yield.

Conventions follow Regulation DD (12 CFR 1030), which governs how US institutions disclose APY on deposit accounts. Deposits at insured institutions are FDIC-protected up to $250,000 per depositor, per bank, per ownership category.

Primary sources

Where these rules come from

The conventions this calculator follows are set by regulators, not by us. Each one links to the issuing body so you can check it rather than take our word for it.

Details

Key details and rules

Scannable facts worth knowing before you open or renew a CD.

Yield and rate are not synonyms. The rate is what the bank applies; the yield is what you end up with after compounding, term length and — if you count it — tax.
CD interest is taxed as ordinary income in the year it is credited, reported on Form 1099-INT. On a multi-year CD you owe tax annually even though you cannot touch the money until maturity, which is a genuine cash-flow consideration on long terms.
Comparing a CD against a Treasury bill needs the tax treatment included. T-bill interest is exempt from state and local income tax, so in a high-tax state a Treasury yielding slightly less than a CD can keep more.
"High-yield CD" is a marketing phrase with no regulatory definition. It usually signals an online bank with no branch network, which is a real cost advantage — but check the minimum deposit and whether the rate is promotional.
Credit unions call the payout a dividend rather than interest and quote a dividend rate alongside an APY. The APY is calculated the same way and remains the figure to compare.

How it connects

Related concepts and calculators

The CD Yield Calculator works alongside these related tools. Each covers one part of the CD picture in full.

Applications

Who this calculator is for

Savers comparing terms that do not match
A 7-month promo against an 18-month standard cannot be judged on interest earned. Annualise both here and the ranking often flips.
Anyone in a higher tax bracket
At a 32% or 37% marginal rate the after-tax gap between a CD and a municipal bond fund narrows sharply. Knowing your after-tax yield is what makes that comparison honest.
Retirees living on interest
Income planning runs on the yield you keep, not the yield advertised. Work from the after-tax figure and the monthly interest line when you build the budget.

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