"Interest income, unlike long-term capital gains, is subject to taxation at ordinary income tax rates at both the federal and state levels," says Will Brennan, certified financial planner and founder at Park Hill Financial Planning and Investment Management.
Understanding how interest is taxed can influence how much of your cash stays in your wallet versus what goes to Uncle Sam, highlighting the importance of financial planning.
If you’ve stashed money in high-yield savings accounts or CDs, any income earned may be taxed, emphasizing the need for tax awareness in personal finance.
Investments that earn interest income, such as savings accounts and Treasury bonds, are subject to federal tax, thus affecting overall financial outcomes.
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