Yes. Money inherited from a Certificate of Deposit (CD) might be taxable, depending on the specifics. Here’s the breakdown:
- Principal Amount: The original amount in the CD is generally not taxable since it’s treated as an inheritance and inherits the decedent's tax status (non-taxable for you).
- Interest Earned: Any interest earned on the CD after the date of death is taxable to you as the beneficiary. This is considered income and must be reported on your tax return. This is typically reported in the Dividend and Interest section of the return.
The financial institution holding the CD should issue a Form 1099-INT, showing the interest income. You’ll use this form to report the amount on your tax return.
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