![]() ![]() ![]() "It has long been that way," said Ken Tumin, founder and editor of, where he tracks the rates on CDs and savings accountsĬonsidering the penalty's tax treatment, "the more mild early withdrawal penalty makes the early withdrawal option more favorable and more useful in this rate environment," he said. "There's a few little gimmes in the IRS tax code and this seems to be one of them," said Jonah Gruda, tax partner in the family wealth services group at Marcum. Turns out you can deduct early withdrawal interest penalties on your taxes, I learned. I asked around and now you might find CDs a little cooler. The humble and steady certificate of deposit is looking more hip while stock market returns lurch lower and interest rates climb higher. Can I deduct the interest penalty from my 1040? I know that I would incur a 6-month interest penalty for early withdrawal. I would like to take advantage of the higher rate. The same bank is now offering 3.5%, 24-month CD. Here's what to know about the tax consequences if you cash out early. Certificates of deposit are having a moment. ![]()
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