How Can One Defer Interest On CDs And Bank Accounts?

rqkjn55
rqkjn55   |     |   7 posts since 2019

I'm in a situation where I need to defer as much interest income as possible to the next year for tax reasons. Would like to know what are the different ways of doing that?

For example, in doing some research on CDs, my understanding is that interest (and tax reporting) on a CD of 1 year or less can be deferred provided all of it is paid as a lump sum at the end of the term. Is this correct?

If so, where would I be able to find such a CD because almost all of the CDs I looked at pay interest on a monthly basis?



Answers
thowellIII
thowellIII   |     |   53 posts since 2015
Buy 52 week Treasury bills. Interest only comes at maturity (and, if you live in a state with relatively high state income tax, they are exempt from state tax). To the extent that it is an issue, you won't have to deal with FDIC limits, either.
rqkjn55
rqkjn55   |     |   7 posts since 2019
Thanks for your reply. T-Bills are a good idea - only issue with them is the not-so-great interest rate currently.
111
111   |     |   57 posts since 2019
thowellIII's comment about T-bills is a good one, and may be your best path.

But to answer your "is this correct" question - yes it is. An example would be the Keesler CU 5% 7-month CD that started last Fall and ended about 3 months ago. Interest was paid in a lump sum at the end, and we received no 1099-INT for 2018 - all interest will be on the 2019-INT form next year. That fit well with our tax planning, also, due to some one-time tax events. I don't expect anything close to 5% going forward, though, from anyone.

As far as where to find CDs with terms under 1 year that pay all interest only as a lump sum at the end - that's a great question. Wish I knew. To separately list these CDs would be a very useful "niche" function for Ken Tumin to add to DepositAccounts.com (although I wonder how much additional manual effort that might involve).
buckeye61
buckeye61   |     |   231 posts since 2011
Ally Bank CD's pay interest annually on terms of 12-Months or more(If you don't choose a monthly check or transfer). A 12-Month CD opened today would pay interest at maturity.
rqkjn55
rqkjn55   |     |   7 posts since 2019
Got an acct at Ally...gonna check out their CDs..thx
rqkjn55
rqkjn55   |     |   7 posts since 2019
Yup, it would be great if there was such a list. How does one bring this to Ken Tumin's attention? Does he post on these boards?
rqkjn55
rqkjn55   |     |   7 posts since 2019
@111
Thx...indeed that CD seems like a great deal with 5%.
diamondx
diamondx   |     |   136 posts since 2011
How about not being taxed at all on money I saved from paychecks every week that has ALREADY been taxed ?
AnnO
AnnO   |     |   129 posts since 2018
You aren't, you're only being taxed on the additional income you earned by having that money in an interest-bearing account.
willy12
willy12   |     |   117 posts since 2019
Keesler has a 30 month CD that starts with a lower rate and increases every 10 months. And some brokered CDs pay every 6 months which would help if you opened it in July.
--------------------
30 Month Step Share Certificate - $1,000 minimum to open
Certificate Type First 10 Months APR* Second 10 Months APR* Final 10 Months APR* Blended APY **
30 Month Step 2.00% 3.00% 4.00% 3.10%
rqkjn55
rqkjn55   |     |   7 posts since 2019
Thx...that is an interesting angle with the step share Keesler CD. Unfortunately it seems I can't join as I'm out of their FOM.
willy12
willy12   |     |   117 posts since 2019
They have a backdoor way of joining. I think it was a $10 donation to some organization. Details were posted here last year when they had a 5% CD.
AnnO
AnnO   |     |   129 posts since 2018
American Cancer Society


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