Yes, checking account bonuses are taxable income to the IRS
A checking account bonus—whether it's $50, $200, or $500 for opening an account and meeting deposit or direct deposit requirements—counts as taxable income in the year you receive it. The bank reports it to you and the IRS on a Form 1099-INT (for interest) or Form 1099-MISC (for miscellaneous income), depending on the bank's reporting method. You owe federal income tax on the full amount at your ordinary tax rate, the same way you would on interest earned in a savings account.
This surprises many people because the bonus feels like a gift or a promotional offer, not income. But the IRS treats it as compensation for opening the account and meeting the bank's conditions. If you receive a bonus and don't report it on your tax return, the IRS will likely catch the discrepancy when it matches the 1099 form the bank filed.
Key Takeaways
- Checking account bonuses are reported on Form 1099-INT or Form 1099-MISC and must be included as income on your federal tax return.
- You pay income tax on the bonus at your ordinary tax rate, which varies based on your total income and tax bracket.
- The bank will send you a copy of the 1099 form by January 31 of the following year, and the IRS receives a copy at the same time.
- State income tax treatment varies: some states tax the bonus, others do not, so check your state's rules.
- If you close the account before meeting the bonus conditions, you typically do not receive the bonus and therefore have no tax liability for it.
When the bank reports the bonus to the IRS
The bank issues the 1099 form in January of the year after you receive the bonus. For example, if you open an account in November 2024 and receive a $200 bonus in December 2024, the bank will send you the 1099 in January 2025, and you'll report that income on your 2024 tax return (filed in 2025).
Not all banks report bonuses the same way. Some use Form 1099-INT if they categorize the bonus as interest-like income. Others use Form 1099-MISC under the "other income" line. A few smaller banks or credit unions may use different forms or may not issue a 1099 at all if the bonus is below a certain threshold—but this does not mean the income is tax-free. You are still required to report it.
If you do not receive a 1099 form from the bank by February 1, contact the bank directly and ask for it. Do not assume the bonus is not taxable just because you did not get a form.
How much tax you owe on the bonus
The tax you owe depends on your total income for the year and your tax bracket. If you earn $50,000 a year and receive a $200 bonus, that bonus is taxed at whatever marginal rate applies to income in your bracket—which might be 12% or 22% for federal tax, depending on your filing status. You do not pay a flat rate; the bonus is added to your other income and taxed accordingly.
For a $200 bonus at a 12% rate, you would owe roughly $24 in federal tax. At a 22% rate, roughly $44. State income tax, if your state has it, is additional. Some states (like Florida, Texas, and Wyoming) have no state income tax, so residents owe only federal tax. Others tax the bonus at rates ranging from 3% to 13%.
The simplest way to estimate your tax liability is to add the bonus amount to your expected taxable income and use the IRS tax tables or a tax calculator to see what your new total tax would be. The difference is what you owe on the bonus.
Bonuses that do not trigger a 1099
Some banks offer very small bonuses—$10 or $25—and may not issue a 1099 if the amount falls below their reporting threshold. However, the IRS does not have a universal minimum threshold for 1099 reporting on bank bonuses. Each bank sets its own policy, and the threshold varies. A bonus of $10 might not be reported by one bank but might be by another.
Even if the bank does not issue a 1099, you are still required to report the income if you received it. The absence of a 1099 does not make the income tax-free. If the IRS audits you and finds unreported bonus income, you could face penalties and interest on top of the tax owed.
State income tax on checking bonuses
Most states that have an income tax will tax checking account bonuses the same way the federal government does—as ordinary income. However, a few states have specific rules or exemptions. For example, some states may not tax certain types of bank promotions if they are structured as rebates rather than bonuses, though this distinction is rare and usually applies only to specific promotional programs.
The safest approach is to assume your state taxes the bonus unless you know otherwise. If you live in a state with income tax and are unsure, check your state's tax authority website or ask a tax professional. The cost of checking is far lower than the cost of underpaying state tax and facing an audit.
What happens if you close the account early
If you open an account to earn a bonus but close it before meeting the bank's conditions—such as maintaining a minimum balance or receiving a direct deposit—you typically do not receive the bonus. In that case, there is no income to report and no tax to pay.
However, some banks claw back the bonus if you close the account within a certain period after receiving it, even if you met the conditions. For example, a bank might require you to keep the account open for six months after the bonus posts. If you close it after three months, the bank may deduct the bonus from your account or simply not pay it. Again, if you do not receive the bonus, you have no tax liability.
Read the bonus terms carefully before opening the account. The fine print usually specifies how long you must keep the account open and what happens if you close it early. This protects you from accidentally triggering a clawback and then being confused about whether you owe tax on money you never actually kept.
How to report the bonus on your tax return
When you file your federal tax return, you will receive the 1099 form from the bank. If you use tax software (like TurboTax, H&R Block, or the IRS Free File program), the software will prompt you to enter the 1099 information. You enter the bonus amount in the section for interest or miscellaneous income, depending on which form the bank used.
If you file by paper, you attach a copy of the 1099 to your return and report the amount on the appropriate line of your Form 1040. The IRS matches the 1099 the bank filed with your return, so the numbers must match. If they do not, you risk triggering a notice from the IRS asking you to explain the discrepancy.
If you received multiple bonuses from different banks in the same year, you report each one separately on your return. The total of all bonuses is added to your other income and taxed at your marginal rate.
Frequently Asked Questions
Do I have to report a checking account bonus if it's under $100?
Yes. The IRS does not have a minimum threshold for reporting bonus income. Even a $10 or $25 bonus is taxable income and must be reported on your tax return, though the bank may not issue a 1099 if the amount is very small. If you do not receive a 1099, you are still required to report the income you received.
What if I received a bonus but the bank never sent me a 1099?
Contact the bank and request the 1099 form. If the bank says it does not issue 1099s for bonuses below a certain amount, ask what that threshold is. You can then decide whether to report the bonus on your own. If the IRS later matches the bank's records to your return and finds unreported income, you could face penalties.
Can I deduct anything to offset the tax on the bonus?
No. The bonus is added to your income as-is. You cannot deduct the cost of opening the account or any fees you paid. However, if you earned interest in the account during the year, that interest is also reported on the 1099 and is taxable. The bonus and interest are separate line items on the form.
Do I owe self-employment tax on a checking account bonus?
No. Self-employment tax applies only to income from self-employment or business activities. A checking account bonus is passive income and is subject only to ordinary income tax (federal and state), not self-employment tax.
What if I opened multiple accounts at the same bank and received multiple bonuses?
Each bonus is reported separately on the 1099 form, and you report each one on your tax return. The bank will list them individually so you can see exactly what you received. The total is taxed as ordinary income at your marginal rate.