When (exactly) is interest earned on CDs that span tax years for tax reporting?

The timing of when CD interest is taxable depends on how the financial institution credits the interest to your account. Generally, interest is taxable in the year it's credited to your account, even if you don't withdraw it. If your bank only credited the interest in January 2025, then you wouldn't have any interest income to report for 2024 on this CD. The key thing to look for in your CD terms is the "interest crediting" or "compounding" schedule - this tells you when the interest actually gets added to your account. For your new potential 12-month CD, you should specifically ask the bank when interest will be credited. Some CDs credit interest monthly, quarterly, semi-annually, or only at maturity. If you open a 12-month CD now and it only credits interest at maturity, then you wouldn't have any taxable interest until 2026 when it matures. But if it credits monthly or quarterly, you'd have some interest income in 2025.

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I work at a credit union (not a tax professional), and this is a common question. The key term you want to look for is "interest crediting" or "interest payment" in your CD disclosure. For tax purposes, interest is generally taxable in the year it's credited to your account, even if you don't withdraw it. Some CDs only credit interest at maturity, while others credit monthly, quarterly, or annually. If your online balance didn't change until January, it sounds like your CD only credits interest periodically rather than monthly. The 1099-INT your bank sends will reflect exactly when the interest was credited for tax purposes. If you didn't receive a 1099-INT for 2024, then the interest wasn't credited until 2025.

Did anyone see if the IRS has specific guidance on this? I looked at Publication 550 and it says interest on CDs is taxable in the year actually or constructively received. I think what's happening with the OP's CD is that the interest is being accrued daily (calculated) but only credited (paid) in January. You're only taxed when it's credited, not as it accrues.

Just to add another perspective - I'm a tax preparer and see this confusion every tax season. The key thing to understand is that CD interest timing can vary significantly even within the same bank depending on the specific product. For your situation, since your balance didn't change until January 2025, you likely won't owe any taxes for 2024 on this CD. The bank will send you a 1099-INT that shows exactly what's taxable for each year. One tip for future CD purchases: always ask specifically about the "interest crediting schedule" before you buy. Some banks will let you choose between monthly, quarterly, or annual crediting, which can help with tax planning. Also, keep in mind that online CD rates often come with different crediting schedules than branch CDs, so don't assume they're the same. For your estimated tax payments as a self-employed person, I'd recommend waiting until you receive your 1099-INT forms in January to know exactly how much CD interest you'll need to account for in your quarterly payments.