2007-08-30 13:27:15 · 6 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
You pay taxes on any interest that you get.
2007-08-30 13:46:37 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
Yes the interest you make on them you have to add to your total earnings for the year and that brings your taxes up a little.
the CD will pay more than the savings though. It is a good idea to do CD's to get the feel of how they work such as laddering them that is get them for different time periods, 3months, 6 month, 1 year 3 year 5 years at different interest rates. That way you can keep up with the changing interest rates and stay ahead. For example CD were barely earning 1% just a few years ago but now they can be gotten at 4% or higher. Look in the higher interest rates so as the rates go down you are still getting the higher rates for a longer period of time.(laddering)
By doing this you will be saving more and making a fair interest rate protected by the gov't and learning about investing.
2007-08-31 00:50:17 · answer #2 · answered by Brick 5 · 0⤊ 0⤋
You will pay taxes on any interest earned during the tax year, therefore anything you earn in you savings from Jan.1 '07- Dec. 31 '07 you will pay taxes on for '07. With a CD, depending on how you take the interest, you will pay taxes during the year when interest is paid. For example: Open a CD 8/30/07 for 12 months so it will mature 8/30/08. If you take interest quarterly you will have to pay taxes for the earnings of 8/30/07 - 12/30/07 for the year '07. If you take the interest at maturity then you will have to pay taxes on it for '08. It all depends on what year the bank pays you interest to your account.
2007-08-31 00:52:34 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Yes, unfortunately the government doesn't even let us keep the interest on what we save in a traditional savings or CD. You should get a statement from the financial institution that holds the account around tax time and there is a place on your taxes to report that information.
2007-08-30 20:34:36 · answer #4 · answered by Ashley W 2 · 0⤊ 0⤋
That depends. If you reinvest CD earnings the potential tax is deferred. Then you would only pay taxes when you withdraw the money.
With a savings account, your interest income is taxable every year right there with income from wages,bingo, yard sales,etc.
The only way you could avoid paying taxes on your savings account interest is to earn below the threshold and do not report it. I believe the threshold for flagging unreported dividend income is $5.00.
2007-08-30 20:40:09 · answer #5 · answered by Lorenzo H 3 · 0⤊ 0⤋
You can get tax deferred cd's but not on savings. Check with your bank.
2007-08-30 23:17:48 · answer #6 · answered by Anonymous · 0⤊ 0⤋