I am looking to start investing semi-large amounts of money into CD's. What kind of taxes should I expect to pay on the interest earned from these CDs? Are there different brackes based on how much total interest is earned, or how is it calculated?? Thanks.
2007-03-05 11:47:56 · 5 answers · asked by Dana S 2 in Business & Finance ➔ Investing
Don't put money in CD's unless you are going to need it in the short term. Otherwise you can buy tax free bonds if you are real conservative. Stocks that pay dividends are the best way to go though.
2007-03-05 12:16:10 · answer #1 · answered by Anonymous · 0⤊ 0⤋
CD is considered capital income and capital income gets taxed 5%-15% in the state of Washington.
Use 1099-INT form to claim on your taxes.
"Interest is paid on bonds and Certificates of Deposit. Interest is taxed at your overall income tax rate, as are any gains from annuities. But dividends aren’t. Just like capital gains, qualified dividends are taxed at a maximum rate of 15%. If you are in the 10% or 15% overall income tax bracket then your dividend tax rate is also only 5%!"
"TIPRA, passed in early 2006, changed this. Between 2008 and 2010, the maximum dividend and capital gains tax rate stays at 15%. But it drops to 0% for those in the 10% or 15% overall tax brackets. You can have capital gains and receive dividends and NOT pay any tax on them!"
2007-03-05 12:11:33 · answer #2 · answered by Geeeyaaa 4 · 0⤊ 0⤋
Hi Dana,
Email me @ yahoo. Depending on your tax situation you can buy ARCs, or auction rate certificates. They are federally and state tax free, Non AMT and (again depending on your bracket) have a better tax-free yield than taxable Cds assuming this is a non retirement account. Also they have 7 day liquidity (access to funds every 7 days) and they pay interest every week. They trade in 25k increments and are about as safe as cash. I love these things for short term cash management. Also depending on amount invested...look up APS, VRDOs (both taxable with better liquidity than Cds.)
2007-03-05 16:42:35 · answer #3 · answered by stuffforsale15001 2 · 0⤊ 0⤋
Yup. All interest of this sort is taxed at your usual income tax bracket. You would have to factor in your normal income to calculate your tax percentage for this type of interest.
2007-03-05 12:01:32 · answer #4 · answered by Drew P 4 · 0⤊ 0⤋
All of it is taxable at your marginal rate unless the CD is held in a tax qualified account (e.g. IRS, Roth IRA).
2007-03-05 11:55:56 · answer #5 · answered by Bill F 2 · 0⤊ 0⤋