Question for the Money Doctors

Question submitted on Dec 20, 2022.

Question

your response to a previous question is incorrect. banks now charge a penalty when withdrawing a CD before maturity. you don't just lose the interest but you incur a penalty against the original principal as well. here was your response: Question
withdrawing a CD before maturity usually includes a penalty of losing the interest and losing part of the original principal. is the penalty considered a capitol loss on your income tax? I've done this a few times to re-invest the money at a higher interest rate.
Answer
Hi, Withdrawing a CD before maturity does cause a loss of interest but not principle. When you file your income tax return next year, look for a form 1099-INT which will indicate the loss of interest to report. Hope this helps!


For additional information visit //www.360financialliteracy.org/

Answer

Hi, Withdrawing a CD before maturity that causes a loss of interest and but principle would allow you to take a loss on your tax return.  That loss would on form 1099-INT which will indicate the loss of interest and penalty to report. Hope this helps!

For additional information visit //www.360financialliteracy.org/