I am trying to figure out, from a tax perspective, which I am better off buying, assuming the income received from either vehicle is the same. Thanks.
2007-09-08 04:49:23 · 5 answers · asked by Daniel D 2 in Business & Finance ➔ Taxes ➔ United States
The income from the CD is interest income, which is taxed at your ordinary tax rate.
The income from the bond, while you hold it, is also interest income. In this sense there is no difference between the CD and the bond.
When you sell the bond, you may have a capital gain or loss if the selling price is more or less than your buy price. Your capital gain is taxed at a maximum rate of 15%. Capital losses can offset capital gains, or can offset ordinary income up to $3,000 a year.
So the bond has some additional features. However as long as you are holding the bond, there is no difference between the income tax on the income from the bond or CD.
2007-09-08 05:03:12 · answer #1 · answered by ninasgramma 7 · 1⤊ 0⤋
While you hold the bond, there is no difference between it and a CD. The interest income is taxed exactly the same either way.
If you sell the bond prior to maturity there may be a gain or loss on the sale that would be treated as a capital gain. The tax rate on that gain would depend upon how long you held the bond for. It would be at your marginal rate if you held it for one year or less. It would be at the lower long-term capital gains rate, usually 15%, if you held it longer than one year.
2007-09-08 09:36:34 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
The interest is taxed the same in both cases. If you buy at issue and hold to maturity, it does not matter much. The only real difference, for tax purposes, is that (in either case), if you redeem a CD before maturity, you have a penalty for early withdrawal, but if you sell a corporate bond before maturity, then you have a capital loss or capital gain.
2007-09-08 06:57:58 · answer #3 · answered by StephenWeinstein 7 · 1⤊ 0⤋
a CD is a tax free investment for starters unless you cash it in before it matures...the money is reinvested in a CD if you leave it alone untill you retire.(67) then you just pay the basic taxes. corporate bond is a joke....put it in a roth IRA from a bank and leave it till you are at least 55 with the max every year for only ten years then leave it alone and you will have close to a million dollars if your around 20 some years old and the right interest rate... Go to Principal.com to look at other figures and inputes to see for yourself what is the best for your personal interests... If you have any question just ask me....I work there..
2007-09-08 05:31:05 · answer #4 · answered by Sandy B 5 · 0⤊ 6⤋
one is capital gains and the other is personal income!!!
2007-09-08 04:54:50 · answer #5 · answered by mister ed 7 · 0⤊ 6⤋