When is interest on a CD reported to the IRS?

[fpc]

If you own a CD now that matures in 2024 or in a later year, will you receive a 1099-INT in early 2024 for interest earned in 2023 even though you haven't withdrawn the interest and the CD hasn't matured?

Thank you!

[Bsch4477]

The interest is reported in the year it is paid. 

[LindaS5247]

Yes. You would report the interest to the IRS when it is earned, and reported to you.

According to the IRS, if the interest earned during the tax year exceeds $10, you must report it on your tax return and pay taxes on it. 1 This reduces your return on the investment, so it's important to consider how CD interest is taxed in order to decide if placing your money in a CD is worth it.

Click here for detailed information on Form 1099-INT.
 

[SteamTrain]

It might depend on the CD.

...some used to only report interest at maturity.

...others may report what accrued during the year.

I suspect that most now report what has been accrued every calendar year.

You could always ask the CD provider

______

[fpc]

So is there a difference between the time the interest is earned and when it is paid?

Maybe the question is:  When you have a CD that matures in 12 months, is interest actually earned prior to the end of the 12 month period?  Maybe interest is neither earned nor paid until the CD matures.  Then on the date of maturity, interest is earned and paid and in addition, the CD could be rolled over for a new 12 month period (?)

Thank you helping me understand this!

[Bsch4477]

There is a difference between interest being accrued or earned and when it is paid to the holder of the CD. When it’s paid, it’s reported. 

[SteamTrain · Accepted solution]

You probably have to ask your provider what they do.

My CDs at Ally always report accrued interest at year end on a 1099-INT for that year, no matter how long the CD is for.  So if a 1 yr CD is purchased 3mos before year end, those 3mos of interest are reported for that year....and then the next 9mos will be included for the next year's 1099-INT.

_____

But like I said...I know some CDs only reported at maturity.

[fpc]

Great!  I'll ask the bank what their policy is for their CDs.

I would have thought that the annual 1099-INT would cover interest accrued - whether paid or not - during the year with no consideration given to maturity date.  I think(??) that once the interest is accrued, it can be withdrawn with no penalty, so available funds would seem to have been earned.  But like you folks are saying, there is no strict policy to follow.

Thank you so much folks for your time to help me with this!

[Juancar]

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.

[DaveF1006]

it doesn't matter if it is 12 Mo or 18 Mos.  The CD's will mature and are payable in 2025.  You will wait until next year to report the interest paid to you.

[Juancar]

Thank you DaveF 1006 for your reply.

See, my confusion is regarding  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

[Frank nKansas]

The problem would be that when you finally did get a 1099 INT, the interest shown would not be the interest you would have to include as income if you had already paid tax on a portion of the interest in a previous year.

Interesting!

[AmyC]

Topic no. 403, Interest received | Internal Revenue Service states: Most interest that you receive or that is credited to an account that you can withdraw from without penalty is taxable income in the year it becomes available to you. 

I read this as interest earned in an account where you could be charged a penalty and lose the income, then it isn't reported until actually earned/ paid rather than accrued.

@Juancar 

@Frank nKansas   

[Frank nKansas]

I interpret it to mean that if you earned interest on an account and it is OK to take advantage of that earned interest without paying a penalty for early withdrawal -- even if you didn't withdraw the earned interest -- then you need to declare it as income for the year in which it was earned.

Perhaps the financial institution in which you earned the interest would issue a 1099-INT if you withdrew interest from the account.  Therefore you would be complying with the regulation and you would be able to properly declare the interest withdrawn in the current tax year since you'd have the 1099-INT.

But if you did not withdraw the earned interest I don't believe the financial institution would issue a 1099-INT (?). Therefore you would not have a 1099-INT to cover the interest since it wasn't withdrawn.  You'd have to create some sort of substitute 1099-INT.............  Which would be awkward.

The regulation is not worded well enough to be adhered to.

[AmyC]

The bank interest is a bit tough since you have to know the rules for that investment and most of them love to charge fees - which takes you back to when paid. Bonds are similar. They can be reported each year as accrued or wait until mature and report it all at once. You get the 1099-INT at the end. See another post of mine for bond information.

@Frank nKansas