Is Interest from a Certificate of Deposit (CD) Considered Investment Income?

Learn whether interest earned on a Certificate of Deposit (CD) counts as investment income and how it's taxed federally and at the state level.

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Yes, the interest earned from a Certificate of Deposit (CD) is considered investment income. This income is typically subject to federal and, in some cases, state taxes. When you earn interest on a CD, the financial institution will usually issue a 1099-INT form, which reports the amount of interest income you’ve earned to both you and the IRS.

FAQs & Answers

  1. Is the interest earned from a CD taxable? Yes, interest earned from a Certificate of Deposit (CD) is considered taxable investment income and is usually reported on a 1099-INT form.
  2. What is a 1099-INT form in relation to CDs? A 1099-INT form is issued by financial institutions to report interest income earned from CDs to both the account holder and the IRS.
  3. Does state tax apply to CD interest income? In some states, the interest income earned from CDs is subject to state taxes in addition to federal taxes.

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