What is after-tax cost of debt?
Because interest expense is usually tax-deductible, the real cost a company bears for its debt is lower than the stated interest rate. After-tax cost of debt measures this true effective cost, and is a key input into the Weighted Average Cost of Capital (WACC).
The formula
After-Tax Cost of Debt = Pre-Tax Interest Rate × (1 − Tax Rate). The calculator also shows the annual interest expense on your debt balance and the dollar value of the tax shield (the tax savings from deducting that interest).
This tool is for general financial education and planning; consult a qualified accountant or financial advisor for decisions specific to your business.
Last reviewed August 2026