Tax Now vs Tax Later Calculator
Compare the impact of paying taxes on investment growth now versus deferring taxes until later
How it works: This calculator shows the difference between paying taxes annually on investment gains (like a regular savings account) versus deferring taxes until withdrawal (like a 401k or IRA).
Quick Start Scenarios
Customize Your Scenario
Adjust the parameters below to see how different tax strategies affect your investment growth
Investment Details
Time & Tax Settings
Your Results
Growth Comparison Over Time
Year-by-Year Details
This detailed table shows the year-by-year breakdown of how each account grows. Scroll horizontally on mobile devices to see all columns.
| Year | Interest
Formula Balance × Rate |
Tax Now
Interest This Year |
Tax Now
Formula Balance + Interest - Tax |
Tax Now
Balance Final Amount |
Tax Later
Formula Balance + Interest (No Tax) |
Tax Later
Balance Final Amount |
Tax Later
Interest This Year |
Difference
Formula Later - Now |
Total
Difference Tax Impact |
|---|
Understanding the Comparison
💰 Tax Now Account
- • Taxes paid annually on interest earned
- • Reduces compounding effect over time
- • Similar to taxable brokerage accounts
- • Lower final balance due to tax drag
🏦 Tax Later Account
- • No taxes during growth period
- • Full compounding on all interest earned
- • Similar to 401(k), traditional IRA accounts
- • Higher balance, taxes paid at withdrawal
💡 Key Insight: The "Total Difference" shows how much more money you can accumulate by deferring taxes. This advantage grows significantly over time due to compound interest working on the full amount rather than the after-tax amount.