Tax deduction of interest lost penalty on closing an IRA CD before maturity.
In other words; If you were to close out a low interest rate CD that your IRA is currently in, which would happen prior to the CD’s maturity date, all in an effort to place it into a now higher interest CD at the same Bank, will the loss of interest (penalty) that the Banks charges you for doing this, be Tax Deductible on your Federal Income Tax Return.
Terry Says
A penalty assessed on the early withdrawal of funds from a time savings account or certificate of deposit is deductible in determining adjusted gross income (AGI), even if it exceeds the interest income earned on the account during the year (IRC § 62(a)(9) ).
But if the CD is inside an IRA and you are subject to RMDs, then there should be no penalty for early withdrawal.
