topic Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchased in March 2023 and matures in March 2024? in Self employed

Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchased in March 2023 and matures in March 2024?

nichsteph — Tue, 10 Feb 2026 10:53:03 GMT

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

JulieS — Sat, 24 Feb 2024 15:18:59 GMT

Yes, the interest on a CD is taxable, but when you report it depends on whether it is a short-term CD, or a long-term CD.

For CD terms of one year or less, you will have to pay taxes on interest when it's received. That means if you start your 12 month CD in 2023, the interest is reported when it matures in 2024.

For CD terms longer than one year, you will have to pay taxes on interest earned each tax year during the CD term.

In either case, your bank, or broker will let you know how much to report by issuing a 1099-INT for the CD interest.

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

jrnrph — Mon, 18 Mar 2024 04:08:31 GMT

I had a 10 month CD in 2023, which matured Feb. 2024, however, I did receive a 1099-INT from my bank. Must I report this on my 2023 taxes?

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

JulieS — Mon, 18 Mar 2024 13:31:22 GMT

Yes, if you receive a 1099-INT from your bank reporting the interest for 2023, you should include it on your 2023 tax return.

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

Juancar — Tue, 08 Apr 2025 23:25:26 GMT

Hi. I have several CDs in a foreign institution in Spain. They all started in January 2024 and they all spanned into 2025 (January 2025 and July 2025). Most of the CDs had a maturity of 12 months, but a couple of them have a maturity of 18 months. They all only pay the interests at their maturity. I have checked with the bank and said I will not receive the equivalent of a 1099-INT until next year because in the eyes of the Spanish legislation that income belongs to the 2025 fiscal year.

I have been asking some people and they are all giving me different answers. I have read some parts of publication 550 and I am still confused.

When do I need to report that money here in the US? Is it the same rule here in the US and report all income in 2026? Is there a difference if the CD is 12 months or 18 months?

Thank you in advance for your help.

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

LeticiaF1 — Wed, 09 Apr 2025 01:12:16 GMT

Interest is reported on the year you receive it or that it is credited to your account. Once, you can withdraw it with no penalties. If the accounts mature in 2025, then you will need to report the income in 2025.

IRS Topic no. 403, Interest received

@Juancar

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

Juancar — Wed, 09 Apr 2025 03:54:11 GMT

Thank you LeticiaF1 for your reply.

Yes, I agree that interest from a CD is taxable income, but see, here is the confusion. Reading Pub 550, on page 7 it says:

Certificates of deposit and other deferred interest accounts.

If you buy a certificate of deposit or open a deferred interest account, interest may be paid at fixed intervals of 1 year or less during the term of the account. You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity.

If interest is deferred for more than 1 year, see Original Issue Discount (OID), later.

My interpretation is, for the CDs that last 12 months and pay interests at maturity, then I will report them in 2026. However, notice that last sentence underlined. When looking farther down in Pub 550, on page 20 it says:

Certificates of Deposit (CDs)

A CD is a debt instrument.

If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID.

The way I interpret that info on pg 20 is that I should report interest accrued, even if it has not been paid.

That is what really confuses me.

How do you interpret that part? Again, I will only receive the interest at maturity and will not receive any equivalent of a 1099 INT until next year.

Thank you

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchas...

RobertB4444 — Wed, 09 Apr 2025 15:26:38 GMT

In your case you have been told that you do not receive any interest until maturity so you are absolutely correct in waiting to include it all in your 2025 tax return.

However, if you want to include the portion that was earned in 2024 on your 2024 tax return then you are fine to do so. You should be able to figure out what portion of the total interest that will be earned at maturity has been earned by the end of 2024. Then, when it matures in 2025 and issues you a statement for the full amount of interest earned, you will just deduct the amount of interest that you reported in 2024.

Keep in mind that if you are paying taxes on this interest in Spain it may be best to declare the income at the same time that it is reported there. The US foreign tax credit gives credit for the lesser of taxes paid or the equivalent US taxes on the foreign income. By splitting up the interest on two separate years you will reduce your foreign taxable income in 2025 and may not be able to take advantage of the full foreign tax credit to which you would otherwise be entitled.

@Juancar

Re: Do you pay taxes on the interest earned on a 12-month CD, that spans two years, i.e., purchased in March 2023 and matures in March 2024?

IntuitiveInvestor — Thu, 26 Feb 2026 13:33:20 GMT

You’ve already gotten solid answers, but here’s anotherr way to think about it.

For most individual taxpayers (who use the cash method), interest is generally taxable when it is:

• Actually received, or
• Credited to your account and available without substantial penalty

For CDs that mature in one year or less and pay interest at maturity, you typically report it in the year it’s paid (which matches what Julie explained).

Where it gets confusing is CDs longer than one year. Under IRS Pub 550, a CD with a term longer than one year can fall under Original Issue Discount (OID) rules. That means you may have to include a portion of the interest in income each year as it accrues, even if you don’t receive the cash yet.

However, in practice:

• A lot of U.S. banks structure CDs so they either issue a 1099-INT for what must be reported, or
• They issue a 1099-OID if annual accrual reporting is required

If you receive neither until maturity, that’s usually a signal that reporting is expected at maturity (though as Robert noted, you can elect to accrue annually if you want consistency).

For foreign CDs, the same U.S. tax principles apply, even if the foreign bank doesn’t issue a 1099. The U.S. taxes worldwide income. The most important question is whether the interest is considered constructively received or subject to OID accrual under U.S. rules, not how the foreign jurisdiction treats it.

One practical tip: the structure of the CD matters (term length, compounding frequency, whether interest is credited annually, etc.). Before opening multi-year CDs, it’s worth understanding how interest will be reported for tax purposes. Always make sure to compare CD rates first. I find CD Valet to be really useful, it's a neutral CD marketplace that lists over 40,000 CDs from federally-insured banks and credit unions across the US. That can help you review term structures and disclosures across institutions before committing, which can avoid surprises at tax time.

Hope that helps clarify the OID vs maturity distinction a bit.

(BTW ITT keeps removing bits of my comment saying its HTML. Not sure what that's about but hope my comment still makes sense!)