When do you report a CD?

[Juancar]

Hello Turbotax Community,

I have several CDs in a foreign institution in Spain. They all started in January 2024 and they all spanned into 2025. Most of the CDs had a maturity of 12 months (January 2024 to January 2025), but a couple of them have a maturity of 18 months (January 2024 to July 2025). 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 interest here in the US? Is it the same rule here in the US and report all income in 2026? Or is there a difference if the CD is 12 months or 18 months?

After reading Pub 550 I am getting the impression that if the CDs have a maturity of 1 year and pay the interest at their maturity, then I will need to report that interest in 2026 (even if they span over two fiscal years). However,  the18 month CDs should be reported each year even if the bank has not paid yet that interest, meaning I would have to report a "phantom" interest for 2024 (basically, to estimate how much I would have accrued over those 11 months) and then in 2026 declare the remaining 7 months. Am I right? 

Thank you in advance for your help.

[DaveF1006]

You would only report the interest in the year that it is paid. It sounds like all the CD's will mature this year and will be reported next tax season on your 2025 Tax return.

[Juancar]

Thank you DaveF 1006 for your reply.

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 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

[DaveF1006]

Yes, I see it now. if you buy a CD with a maturity of more than a year, you must include in your income each year a part of the total interest due and report it in the same manner as other OID. This would be the interest accrued in the account.