Yes, you must report checking account interest as income on your federal tax return

Any interest your checking account earns counts as taxable income. The IRS requires you to report it on your tax return, even if the amount is small. Your bank will send you a Form 1099-INT in January showing how much interest you earned during the previous year, and you use that form to report the income on your return.

The threshold for receiving a 1099-INT varies by bank and year, but many banks send the form if you earned $10 or more in interest. However, you must report all interest income, regardless of whether you receive a 1099-INT. If your bank does not send one, you still owe tax on the interest.

The amount of interest you earn on a checking account is usually small because checking accounts typically pay very low rates. But the reporting requirement applies no matter the amount.

Key Takeaways

  • All checking account interest must be reported on your federal tax return as income, even amounts under $10.
  • Your bank sends Form 1099-INT if you earned interest above their threshold, usually $10, but you report all interest whether or not you receive the form.
  • Interest income is reported on Schedule 1 (Form 1040) or Schedule B if you have other investment income.
  • Most checking account interest is taxed at your ordinary income tax rate, which depends on your tax bracket.

How the IRS knows about your interest income

Banks report interest payments to the IRS on Form 1099-INT. Your bank sends you a copy and files a copy with the IRS. The IRS matches what banks report against what you report on your tax return, so underreporting or omitting interest income creates a mismatch that can trigger an audit notice.

If you have multiple checking accounts at different banks, each bank that pays interest will send you a separate 1099-INT. You add up all the interest from all accounts and report the total on your return.

Where to report checking account interest on your tax return

If your total interest income for the year is $1,500 or less, you report it on Schedule 1 (Form 1040), line 8, labeled "Interest." You then transfer that amount to line 3 of your Form 1040.

If your total interest income exceeds $1,500, or if you have other investment income like dividends or capital gains, you must file Schedule B (Interest and Ordinary Dividends) instead. Schedule B requires you to list each source of interest separately and calculate your total.

Many tax software programs ask you to enter your 1099-INT information, and the software automatically places the amount in the correct location on your return.

What tax rate applies to checking account interest

Checking account interest is taxed as ordinary income, meaning it is taxed at your regular income tax rate based on your tax bracket. If you are in the 22% tax bracket, interest income is taxed at 22%. If you are in the 12% bracket, it is taxed at 12%.

This is different from long-term capital gains or may have access to dividends, which may receive preferential tax rates. Interest income gets no special treatment.

Some states also tax interest income. State tax rules vary, so check your state's tax guidance or speak with a tax preparer if you live in a state with income tax.

When you do not receive a 1099-INT

If you earned interest but your bank did not send you a 1099-INT, you still must report the interest on your return. This can happen if you earned less than the bank's reporting threshold or if the bank made an error.

Check your bank statements or online account history to find the interest earned. Add up the interest from all statements for the year and report that total on your return, even without a 1099-INT in hand.

If you later receive a 1099-INT that shows a different amount than what you reported, you may need to file an amended return. Contact your bank to verify the correct amount before amending.

Reporting interest when you file jointly or separately

If you file a joint return with a spouse, combine all interest income from both of your accounts and report it as one total on the joint return. If you file separately, report only your own interest income on your individual return.

If you have a joint checking account with your spouse, the interest belongs to both of you. The bank may report all of it on one 1099-INT under one person's name, or it may split it between two forms. Either way, you and your spouse must decide how to divide the income on your separate returns, or report it all on your joint return.

Interest from minor children's accounts

Interest earned in a child's checking account is the child's income and must be reported on the child's tax return, not the parent's. However, if the child's income is below the standard deduction for that year, the child may not owe federal income tax even though the interest must be reported.

A parent who is the custodian of the account should not claim the interest as their own income. The bank will issue the 1099-INT in the child's name and Social Security number.

Frequently Asked Questions

What if my checking account interest is only a few dollars?

You still must report it on your tax return. The IRS requires reporting of all interest income, regardless of amount. Most banks do not send a 1099-INT for very small amounts, but you are responsible for reporting what you earned based on your statements.

Can I deduct the taxes I pay on interest income?

No. Interest income is added to your other income and taxed at your regular rate. You cannot deduct the tax you owe on it. However, if you have investment expenses or losses, those may offset some of your interest income.

Do I report checking account interest differently than savings account interest?

No. Both are reported the same way on Schedule 1 or Schedule B. The type of account does not matter — all interest income goes in the same place on your return.

What if the 1099-INT my bank sent me has the wrong amount?

Contact your bank immediately and ask them to issue a corrected 1099-INT. Do not file your return until you have the correct form. If you already filed and the amount was wrong, you can file an amended return once you receive the corrected 1099-INT.

Is checking account interest subject to self-employment tax?

No. Self-employment tax applies only to income from self-employment or business activity. Interest income is passive income and is not subject to self-employment tax, even if you are self-employed.