No taxes are owed on the transfer of a Payable on Death (POD) certificate of deposit (CD) to the beneficiary.
However, any interest earned between the death of the original owner and the transfer will be considered ordinary income on the tax return of the person who inherits it. The bank holding the CD will issue a Form 1099-INT for any interest earned.
Here’s how to enter Form 1099-INT into TurboTax:
- Open or continue your return.
- Go to the 1099-INT interest income section.
- Select "Yes" when asked if you received any investment income, then click "Continue."
- If you see a screen titled "Your investments & savings" or "Here's your 1099-INT info," select "Add investments" or "Add another 1099-INT," then click "Continue."
- On the next screen, choose how you want to enter your Form 1099-INT:
- To import, search for your brokerage or financial institution, sign in, and select "Get my form."
- To upload a copy or enter manually, select "Enter a different way" and follow the instructions.
See this TurboTax Help Article for more information.