Are CD gains taxable?

Question

Same applies to savings, are they?

If yes, that's PRETTY MESSED UP. It's not bad enough you only get 5 cents on the dollar you have to be taxed on that too? PLEASE taxation has always been well above 5 cents on the dollar, so why should you be paid less than the government taxes you? (Ok, that left my point, back to the question)

So, are CD gains taxable? From my understanding, all transactions with a papertrail are taxable.

Ok, so I guess the answer is YES. SO that's just another better reason NOT to be in CD, low rates is laughable enough, but when the amount gets big, I have to be taxed on it. Yes, I'd rather work under the table and radar.

Paper trail is the issue if it's the only evidence that can convict me for failing to file my taxes. You can mow my lawn and get $10 from me, but if we both shut up, who cares if it's illegal to avoid the taxation so long as they can't track it down?

Answer 1

Sec. 51 of the Internal Revenue Code reads something like "income is income is income"..

Here are some of the items that most people don't even know are taxable:

Bribes, Money found on the street, Money earned from selling drugs, ect.

Now, if those items are taxable, it's easy to see how Interest of any kind a (Bank) will offer you is taxable.

However, you still come out ahead. Do the math for one second.

You put $100,000 in a CD at 5% APY. At the end of that one year, you earned $5,000! Well, that $5,000 is taxable. Let's just say you are well over the Standard deduction amount and that you don't itemize, so all of this $5,000 will be taxed!!! Oh no! What the hell does that mean!!! It means this:

$5,000 x (whatever your tax rate "let's say 25%") = $1,250.

So now, let's analyze what just happened. You made $5,000 of interest in that year, and your tax bill was $1,250. So the difference is really what you made after tax (Net). That would be $5,000 - $1,250 = ($3,750). So, one way to look at this is to go back and say to yourself; "If I put $100,000 in the bank on a CD, how fast will my money grow each year?" Well, it would grow at (3,750/100,000) so 3.75% each year. That's 0.35% higher than the average inflation rate, so you're NOT losing money as the years go by, but you're not making a ton of money from the CD either!

So who is making the money? The bank. They will hold onto your $100,000 and pay you 5% each year; but will lend it out to people who they will charge 9% APR!! (There is a difference between APR & APY, Google it!).

If you really want to know the secret behind actual rates of return; (Mutual Funds the Invest in Municipal Bonds, or simply invest in Municipal Bonds yourself).

Municipal Bonds, (Munies for short), are Bonds Issued by the State, City, or Local government. They typically pay slightly less than 5% interest each year, but they come with one great feature that makes up for that, (They are not Taxed by the IRS). That's right! So that 4.5% interest you earn of them each year will be $4,500 you get to hold onto at the end of each year, as opposed to just $3,750.

If it's not alot of money you're dealing with, then it's not worth the time & complexity to earn a slightly higher actual net interest rate. Usually, very wealthy people stick loads of money in Munies to avoid insane tax rates at their income levels.

I hope this was helpful, sorry I wasn't more cheerful, had a bad day; but I hope it all works out for you. Best of Luck.

Answer 2

The paper trail is not the issue. There is no such thing as a 'gain' on a CD. The interest you earn is taxable. Any money you receive is taxable income unless the IRS says it is not. If I mow your lawn and you give me $10 cash, that is taxable income even with no paper trail. The ONLY crime for which Al Capone was convicted is not paying taxes on the proceeds from all his other crimes.

Answer 3

It depends. If you hold the certificate until maturity, only the interest earned on the certificate is taxable (assuming the cd is held outside of an IRA or something like that). If you're buying the cds through a brokerage and sell prior to maturity, there may be a gain or loss on the sale of the security.

Answer 4

yes, the gains are considered income! just like if you had worked for it. I agree it is messed up, but that is the way the law is set up right now....

I hope that one day people will all stand up and say enough is enough when it comes to taxes, but who knows how long that will be!

Answer 5

yes they are taxable just like all earn and unearned income!!!

you would make a good canidate to work under the table for some one!!!

Answer 6

The IRS says that in case you provided the money, that's your income. in case you in basic terms provided a million/2 of the money, you have been a nominee for her a million/2. if it is so, you in basic terms checklist a million/2 and tell her to checklist the different a million/2.

Answer 7

you mean interest earned? i think if it's over a certain amount you have to report it.