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Certificates of deposit promise a higher interest rate than savings accounts in exchange for your commitment to leave the money in the account for a specified period of time. Like most other types of interest income, the interest from your CD counts as taxable income in the year it's paid to the account. When you file your taxes, you have to include the interest earned on your CD as part of your taxable income. At the end of the year, your bank sends you a Form 1099-INT that documents your interest income from the CD.
Complete Schedule B if your total interest for the year, including the interest on your CD, exceeds $1,500. On the form, include the name of the financial institution that paid the interest and the amount you received. Locate the amount of taxable income from your CD in Box 1 of the Form 1099-INT that your bank sends you at the end of the year. If you have less than $1,500 of interest income, you do not need to complete Schedule B, but you still need to total your interest income.
Report the interest income from the CD on Line 8a of Form 1040. This amount adds to your taxable income for the year.
Report the early withdrawal penalty charged, if any, on Line 30 of Form 1040. The penalty, if any, appears in Box 2 of your Form 1099-INT.
Items you will need
- IRS Form 1099-INT
- IRS Schedule B
- IRS Form 1040
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