Yes, bank sign-up bonuses count as taxable income
A sign-up bonus from a bank—whether it's $200 for opening a checking account or $500 for setting up direct deposit—is treated as income by the IRS. The bank reports it to you and the IRS on a 1099-INT form (or sometimes a 1099-MISC), and you owe federal income tax on the full amount. This applies whether you earned the bonus by meeting a minimum deposit, keeping a balance, or setting up automatic payments.
The tax you owe depends on your overall income and tax bracket. A $300 bonus might add $75 to $90 to your tax bill if you're in the 25–30% bracket, or as little as $30–45 if you're in a lower bracket. The bank does not withhold tax from the bonus—they simply report it—so you pay it when you file your return or make quarterly estimated tax payments if you have other self-employment income.
Key Takeaways
- Bank sign-up bonuses are reported on Form 1099-INT or 1099-MISC and must be included as income on your tax return.
- You owe federal income tax on the full bonus amount; the tax rate depends on your tax bracket and total income.
- The bank does not withhold tax from the bonus, so you are responsible for paying it when you file or through estimated quarterly payments.
- If you do not receive a 1099 form by late January, contact the bank to request it or report the bonus anyway based on your records.
- State income tax rules vary; some states tax bank bonuses the same way, while others may have different treatment.
How the bank reports the bonus to the IRS
Banks issue a 1099-INT when the bonus is classified as interest income, which is common for savings accounts, money market accounts, and some checking accounts. If the bonus is classified differently—such as a promotional credit—the bank may use a 1099-MISC instead, reported in Box 3 (other income). Either way, you receive a copy by January 31 of the year following the year you earned the bonus.
The form shows your name, Social Security number, the bank's name and tax ID, and the bonus amount. You use this information to fill out your tax return. If you open multiple accounts at the same bank or different banks in one year, each bonus appears on a separate 1099 or is combined on a single form from that bank, depending on how the bank's system works.
The IRS receives a copy of every 1099 the bank sends you. If you do not report the bonus on your return, the IRS will eventually notice the mismatch and may send you a notice asking for the unpaid tax plus penalties and interest.
When you might not receive a 1099 form
Banks are required to issue a 1099 only if the bonus is $10 or more. If your sign-up bonus is under $10, the bank may not send a form, but you still owe tax on it. Report it on your return based on your own records—the deposit confirmation, email receipt, or bank statement showing the credit.
Some banks delay issuing 1099s or issue them incorrectly (wrong amount, missing information, or sent to an old address). If you do not receive your form by early February, log into your online banking or call the bank's customer service line and request a copy. Provide your Social Security number and the year in question. The bank must reissue or correct the form and send it to you and the IRS.
If the bank refuses or cannot locate the bonus, document what you can—screenshots of the account opening offer, the deposit confirmation, and the credit posting to your account—and report the bonus on your return anyway. Keep your documentation in case the IRS asks questions later.
Reporting the bonus on your federal tax return
On your Form 1040, report the bonus on the line for interest and dividend income. If you use tax software, you enter the 1099-INT information directly into the program, and it places the amount in the correct spot. If you file by hand, you report it on Schedule 1 (Other Income) or directly on the 1040, depending on the form version and your filing status.
If you received multiple bonuses from different banks, add them together and report the total. The IRS does not care that the money came from bonuses rather than interest; it all counts as income. If the total bonus income is your only income source and it is under the standard deduction for your filing status, you may not owe federal tax, but you should still file to claim any refundable credits you may have access to for.
State income tax on bank bonuses
Most states that have an income tax treat bank bonuses the same way the IRS does—as taxable income. You report the bonus on your state return using the same 1099 form. A few states have different rules or exemptions, so check your state's tax authority website or ask a tax preparer if you live in one of these states: New Hampshire (which taxes interest and dividends differently), Tennessee, or any state with no income tax.
If you live in a state with no income tax (such as Florida, Texas, or Wyoming), you owe no state tax on the bonus, though you still owe federal tax. If you work or have income in multiple states, you may need to file in more than one state; the bonus is typically reported in the state where you live.
Bonuses and your overall tax situation
A large sign-up bonus can push you into a higher tax bracket or affect other parts of your return. For example, if the bonus income causes your total income to exceed a certain threshold, you may lose may be able to access for certain tax credits or deductions, or you may owe the Net Investment Income Tax (3.8% on investment income for high earners). This is rare for small bonuses but worth considering if you are opening multiple accounts in one year.
If you are self-employed or have other sources of income that require quarterly estimated tax payments, a sign-up bonus may increase your quarterly payment obligation. Use IRS Form 1040-ES to calculate whether you need to adjust your payments.
What to do if the bank reports the wrong amount
If the 1099 shows a bonus amount that does not match what you received, contact the bank immediately. Provide the account number, the date the bonus posted, and your records showing the correct amount. Ask the bank to issue a corrected 1099 (marked as a correction) and send it to both you and the IRS.
If the bank corrects the form before you file, use the corrected amount on your return. If you have already filed and the bank later corrects the amount, you may need to file an amended return (Form 1040-X) to match the corrected 1099. The IRS will cross-check your return against the 1099 they receive, and if they do not match, you will receive a notice.
Frequently Asked Questions
Do I have to report a $50 sign-up bonus if I did not get a 1099?
Yes. Banks only issue 1099s for bonuses of $10 or more, but you owe tax on any bonus regardless of whether you receive a form. Report it on your return using your own records. The IRS may not catch a small unreported bonus, but reporting it is the correct approach and protects you if they do.
What if I opened the account but did not meet the bonus requirements?
If you did not meet the terms (such as the minimum deposit or direct deposit requirement), the bank should not have credited the bonus. If it did by mistake and later reversed it, you do not report it as income. If the bank credited it and never reversed it, you still owe tax on it, even if you did not technically earn it. Contact the bank to clarify; if they say it was an error, ask them to reverse it and issue a corrected 1099.
Can I deduct the cost of opening the account against the bonus income?
No. The bonus is income, and there is no corresponding deduction for the effort or cost of opening an account. You cannot deduct account fees, minimum deposits, or time spent as a business expense related to the bonus.
If I move the money out of the account right after getting the bonus, do I still owe tax?
Yes. The tax is based on receiving the bonus, not on how long you keep the money in the account. Moving the funds does not change your tax obligation. You owe tax on the bonus in the year it posted to your account, regardless of what you do with the money afterward.
What happens if I do not report the bonus on my return?
The IRS will eventually match the 1099 the bank sent them against your return. If the bonus does not appear, they will send you a notice asking for the unpaid tax plus interest (currently around 8% per year) and penalties (typically 20% of the unpaid tax). It is much cheaper to report it correctly the first time.