Different investment income is taxed differently. See the total federal tax.
Estimates the federal tax on investment income by taxing interest at your ordinary rate and qualified dividends and long-term gains at your capital gains rate.
Interest income is generally taxed at ordinary income rates, the same schedule that applies to wages, while qualified dividends and long-term capital gains usually receive lower preferential rates. Separating these buckets shows why two portfolios with the same total income can owe very different tax. This tool applies the rate you enter to each category and sums the result.
This estimate treats each income type with a single flat rate you supply rather than modeling brackets, the net investment income tax, or holding-period tests that determine whether dividends qualify. It also does not address the deductibility of investment interest expense, which has its own limits and requires itemizing. Use it to compare the relative tax weight of interest versus preferential income, not as a filing figure.
Qualified dividends and long-term capital gains generally qualify for preferential federal rates, unlike interest, which is taxed as ordinary income. That difference is the point of comparison here.
No, the 3.8 percent net investment income tax and bracket phase-ins are not modeled. High earners may owe more than this estimate shows.
No, this tool estimates tax on investment income and does not calculate the investment interest expense deduction, which is limited and requires itemizing. See a tax professional for that.
See the exact formula and a worked example on our methodology page.