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Taxes on certificates of deposit?

Hello Folks,

   I am a retired 70-year-old and have no employment income. I'm thinking if opening a 6-month certificate of deposit at a rate of 3.5% My bank doesn't think I will owe any taxes on these earnings, but I have my doubts. Can someone please advise me as to whether I will not ever have to pay taxes on certain CDs, or what the conditions might be when I have to pay taxes?

Cheers,

Eric Morlock

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There is no way for us to know if you will have to pay taxes on the interest.  It all depends on all your sources of income and how much that income is. 

 

All CD interest will be reported on your tax form.  None of it is exempt from taxes. By the time we add our interest to our Social Security and other income (neither of us have employment income) we still end up paying taxes on part of our Social Security and on the CD interest. You do have your standard deduction to offset some of your income.  All I can say is make a trial run on the tax forms and see if you would have to pay taxes.  That is what I do. 

 

In other words, if all your sources of income including taxable Social Security and CD interest exceed your standard deduction, you will owe taxes.

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