#7 Interest-Bearing Accounts
These types of accounts can be any type of account that is going to generate money passively just because you have bought a certain type of account from the bank. Yet you will still have to pay some form of tax on the income these interest-bearing accounts generate. Some of them, such as municipal bond interest, will not be subject to federal taxation.
At a state level, you will not have to pay state income taxes on the interest gained from bonds that were issued in the home state of the investor, yet this can change depending on which state you are currently residing in.
Other types of accounts that generate income through interest, like savings accounts, corporate bonds, money market accounts, and certificates of deposit, are going to be taxed according to ordinary income tax rates. So if you had these types of accounts even before you entered retirement, you know how they work and there is no change on that front.
And if you have been scared of the capital gains rates, unless you have been selling municipal or corporate bonds, you do not have to worry about these rates.
A lot of us have piles and piles of tax documents. Find out for how long you are supposed to keep your tax records and if maybe it’s time for you to throw some of them away!
