Is interest on a CD taxed in the year it's accrued, or the year the it matures?
For Example, if I buy a 6 month CD now (September '07) will some of the interest have to be claimed on my 2007 taxes, or will it all be on my 2008 tax return?
2007-09-15 13:51:25 · 5 answers · asked by Daniel W 2 in Business & Finance ➔ Taxes ➔ United States
Thanks, for all the answers. I did a little research on my own and found this:
"A portion of the discount from face value of a zero-coupon CD will be taxable to the beneficial
owner of the CD each year as ordinary interest income, even though the cash attributable to this discount is not received by the owner until the
maturity of the CD. Interest paid on an interest-bearing CD is generally taxable each year as ordinary income to the beneficial owner thereof
in accordance with the owner's method of accounting."
Does this mean the answer varies bepending on if it's a "zero coupon" CD or and "interest bearing" CD?
2007-09-17 06:28:52 · update #1
The interest you actually receive or constructively receive in 2007 is the interest you add in 2007. You constructively receive the interest when it is credited to your account, even you may not be able to withdraw it without meeting some conditions.
You will receive 1099-INT from the institution where you have the CD. Amount shown on 1099-INT for 2007 is your 2007 income.
2007-09-15 14:25:30 · answer #1 · answered by MukatA 6 · 3⤊ 0⤋
Most commonly the interest on a bank CD is credited to your account monthly. If you buy a 6 month CD in September, you will have interest credited for four months in 2007.
You will receive a 1099INT from your bank showing the interest which has been credited to you in 2007, whether you took receipt of the money or not. You report this interest on your 2007 tax return.
If in 2008 you withdraw the money early and pay a penalty, the penalty would be deducted in 2008 for interest you were credited with and taxed on in 2007.
2007-09-16 02:29:44 · answer #2 · answered by ninasgramma 7 · 2⤊ 0⤋
The interest on a CD is taxed in the year it's accrued.
If you open a six month CD now, you will have to claim the interest earned on for three months on your 07 return and the rest will be on the 08 return.
2007-09-15 20:56:07 · answer #3 · answered by Anonymous · 1⤊ 0⤋
You will receive a statement in Jan, from your bank, with the amount of interest accrued. That is taxable on your April return.
2007-09-15 21:01:40 · answer #4 · answered by ed 7 · 2⤊ 0⤋
The year that the interest matures and is available to you.
2007-09-15 20:54:47 · answer #5 · answered by Gary 5 · 1⤊ 2⤋