Cost of Debt Calculator
Calculate a company's after-tax cost of debt from its interest rate and corporate tax rate.
What this calculator does
The Cost of Debt Calculator estimates your result instantly from the values you enter, using standard investing & wealth formulas. Calculate a company's after-tax cost of debt from its interest rate and corporate tax rate. Calculations run in your browser, so nothing you type is sent to a server, and the output is an estimate for planning rather than financial advice.
Result
About Cost of Debt Calculator
The Cost of Debt Calculator converts the interest rate a company pays on its debt into an after-tax cost, because interest is tax-deductible. From the interest rate on the debt and the tax rate, it multiplies the rate by one minus the tax rate to give the after-tax cost, and shows the pre-tax rate alongside it.
The after-tax cost of debt is what actually matters for the weighted average cost of capital, since the tax deduction on interest lowers the true cost of borrowing. The calculator applies that adjustment directly to the two figures you enter.
Enter the interest rate on the debt and the tax rate, press Calculate, and read the pre-tax and after-tax cost of debt.
Formula & Mathematical Calculation
After-Tax Cost of Debt = Interest Rate × ( 1 − Tax Rate ÷ 100 )
Calculation Example
A 6% interest rate at a 25% tax rate has an after-tax cost of 6% × (1 − 0.25) = 4.5%, while the pre-tax cost stays 6%.
Key Benefits
- Converts a stated interest rate into its after-tax cost of debt.
- Reflects the tax deductibility of interest that lowers real borrowing cost.
- Shows the pre-tax and after-tax figures side by side for comparison.
- Produces the debt input needed for the weighted average cost of capital.
How to Use this Calculator
-
Enter the interest rate on debt
Type the rate the company pays on its debt as a percentage in the Interest Rate on Debt field, for example 6. -
Enter the tax rate
Type the applicable tax rate as a percentage in the Tax Rate field, for example 25. -
Press Calculate
The tool multiplies the interest rate by one minus the tax rate to return the after-tax cost of debt. -
Compare the two figures
Read the pre-tax cost next to the after-tax cost to see how much the tax shield reduces the effective rate.
Assumptions & Limitations
What the calculation assumes
- Every value you enter is treated as an exact, known amount.
- Rates and contributions are assumed to stay constant for the whole period unless the form asks for them separately.
- Results use standard financial formulas and ignore fees, penalties and promotional terms that are not entered above.
- Inflation, tax changes and market volatility are not modelled unless a field for them is provided.
- Amounts are unit-agnostic: results are returned in the same currency you enter.
What it does not cover
- Cost of Debt Calculator produces estimates for education and planning, not a quote, offer or professional advice.
- Real-world outcomes differ when fees, taxes, rounding rules or provider-specific terms apply.
- Local regulations and tax rules vary by country and change over time; verify current rules for your jurisdiction.
- Figures are only as accurate as the inputs you supply — check them before acting on the result.
- For decisions with lasting financial impact, confirm the numbers with a qualified professional.
Frequently Asked Questions
Free to use, no account needed. Calculations run in your browser, so nothing you type is sent to a server. Results are estimates — how we build and check our calculators.
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