Question about taxation and CD interest

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Smokey21
Posts: 118
Joined: Fri Oct 31, 2014 7:07 am

Question about taxation and CD interest

Post by Smokey21 »

I've never purchased CDs but I purchased some in February of this year. None of them come due until 2021 or later.

Is the accrued interest through the end of 2020 going to be taxable to me in the filing for year 2020 or do I pay tax on the interest when the CD comes due?
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FiveK
Posts: 10301
Joined: Sun Mar 16, 2014 2:43 pm

Re: Question about taxation and CD interest

Post by FiveK »

You should receive a 1099-INT in January 2021 showing the interest credited to you in 2020, and that amount will be taxable for the 2020 tax year.
kaneohe
Posts: 6690
Joined: Mon Sep 22, 2008 12:38 pm

Re: Question about taxation and CD interest

Post by kaneohe »

If the CD has a term of 1 yr or less, the bank may choose to pay the interest at maturity so it would be for 2021 if they do that.
If the CD has term > 1yr, the interest is credited each yr.
Doctor Rhythm
Posts: 425
Joined: Mon Jan 22, 2018 3:55 am

Re: Question about taxation and CD interest

Post by Doctor Rhythm »

Income (including interest income) is generally taxable for the year that it’s paid. So, if your CD account is getting bigger each month due to interest, you’ll be taxed on it for 2020.
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