How the Recurring Deposit vs CD After-Tax Interest Calculator Works
If you're saving the same total amount, a monthly recurring deposit and a lump-sum CD (certificate of deposit) don't earn the same interest — even at an identical rate. This calculator compares the two side by side, using your marginal federal tax rate to estimate what you'd actually keep after tax.
The difference comes down to time in the account. A CD earns interest on the full amount from day one, while a recurring deposit only earns interest on each contribution from the month it's made — your first deposit earns a full term of interest, but your last deposit barely earns any. That's why, for the same total amount, rate, and term, a CD typically comes out ahead.
Unlike some countries that apply a flat withholding tax to interest income, the U.S. taxes interest as ordinary income at your marginal federal bracket, with state tax added on top where applicable. Enter your estimated marginal rate to see a realistic after-tax comparison — useful when deciding whether to lock money into a CD or keep building it up gradually.
Frequently Asked Questions
A CD holds your full lump sum earning interest from day one through maturity. A recurring deposit adds money monthly, so only the first deposit earns interest for the whole term — later deposits earn interest for less time, which lowers the average interest earned versus a CD of the same total amount.
Yes — if the total amount contributed, the rate, and the term are identical, a lump-sum CD earns more interest than spreading the same total across monthly deposits. The advantage of a recurring deposit is that it lets you build savings without having a lump sum up front.
No. Unlike countries with a flat withholding tax on interest, U.S. interest income is added to your other income and taxed at your marginal federal tax bracket, plus state tax where it applies. This calculator applies the marginal rate you enter to estimate after-tax interest.