What are the tax liabilities if I cash in my CD for a down payment on a house? How?

There is no tax consequences from cashing a CD, the income has been taxes annually anyway. When you convert a residence to rental, you'll lose the home sale exclusion on any gain for selling the home (but it doesn't sound like you're sitting on a big gain anyway). You will be able to depreciate the house, which will probably defer taxes on all or substantially all the income from renting. A non-tax item you should know is that you'll have to replace your homeowners insurance with a commercial property policy. Cost shouldn't be much different (there is less property to cover - because all your stuff like TVs and clothes aren't in the rental, which makes it cheaper but there is more liability - your tenants can sue you for a fall on a broken step but you can't sue yourself - which increases the cost)

If the CD was indeed a retirement in tax-deferred you'll have to pay federal and state income taxes on the amount of interest which accrued during its existence as well as potentially a 10% early withdrawal penalty. I cannot tell without actual details. You should see a tax attorney before you do something you cannot reverse.