Yes, you report savings account interest on your federal tax return, even if the bank sends you a form or not

The IRS requires you to report all interest income, including interest earned on savings accounts, money market accounts, and certificates of deposit. This is true whether the interest is $1 or $1,000. The bank is not required to send you a form if the interest is under $10, but you still owe tax on it. If the interest is $10 or more, the bank will send you a Form 1099-INT by January 31 of the following year, and they also send a copy to the IRS. You report this interest on your federal tax return.

The amount you owe in tax depends on your tax bracket and total income for the year. Interest income is taxed as ordinary income at your regular tax rate, not at a lower capital gains rate. If you have multiple savings accounts at different banks, you add up all the interest from all accounts and report the total.

Key Takeaways

  • You must report all savings account interest to the IRS, even if it is less than $10 and the bank does not send a form.
  • Banks send Form 1099-INT when interest reaches $10 or more, and the IRS receives a copy automatically.
  • Interest income is taxed at your regular income tax rate, not a special lower rate.
  • If you do not report interest income that the IRS knows about from the 1099-INT, the IRS will likely catch the discrepancy and send you a bill.
  • You report interest on Schedule 1 (Form 1040) or on your tax software's interest income section.

What happens if you do not report interest income

If the bank sent a Form 1099-INT to the IRS and you do not report that same interest on your return, the IRS will notice the mismatch. The IRS matches 1099 forms to tax returns automatically. You will receive a notice demanding payment of the tax owed plus interest on the unpaid tax, and possibly a penalty for underpayment.

Even if the interest is under $10 and no form was issued, you are still legally required to report it. The risk of audit is lower for very small amounts, but the obligation remains. The safest approach is to report all interest, no matter the amount.

How to report interest on your tax return

If you file on paper, you report interest income on Schedule 1 (Form 1040), line 8. You add up all interest from all sources and enter the total. If you use tax software, the program will ask you for interest income and place it in the correct location automatically.

You do not need to attach the Form 1099-INT to your return. Keep it for your records. If you received multiple 1099-INT forms from different banks, add them all together and report the combined total on one line.

Interest from joint accounts and accounts held by minors

If you own a savings account jointly with another person, each owner reports their share of the interest. The Form 1099-INT will show the full interest amount, but you only report your portion. You and the other owner must agree on how to split it, or the IRS may assume you each earned half.

If you have a savings account for a minor child, the interest is taxable income to the child, not to you as the parent. However, if the child's total income is below the standard deduction for that year, they may not owe tax. The child (or their parent on their behalf) still files a return to report the interest and claim the standard deduction, which wipes out the tax liability. A child's savings account interest is reported on the child's tax return, not the parent's.

When interest is too small to report

There is no threshold below which interest becomes unreportable. Even $0.50 in interest must be reported. However, banks only issue a Form 1099-INT when interest reaches $10 or more in a calendar year. If your interest is under $10 and no form arrives, you still report it on your return based on your own records or your bank statement.

In practice, very small interest amounts rarely trigger an audit. The IRS prioritizes cases where a 1099-INT was issued and not reported. But the legal requirement to report stands regardless of the amount.

Interest from different account types

Savings accounts, money market accounts, and certificates of deposit (CDs) all generate interest that must be reported. High-yield savings accounts earn more interest than traditional savings accounts, so the reporting obligation is the same but the amount you report will be larger. Interest from any account held at a bank, credit union, or online bank counts.

Interest from bonds, Treasury securities, and other investments may be reported on different forms (such as Form 1099-OID for original issue discount), but the principle is the same: all interest income is taxable and must be reported.

State and local taxes on interest income

Most states tax interest income the same way the federal government does. You report the same interest amount on your state tax return as you do on your federal return. Some states do not have income tax, so you would not owe state tax on interest, but you would still owe federal tax. A few states exempt certain types of interest (such as interest from Treasury securities), but savings account interest is taxable in all states that have an income tax.

Check your state's tax agency website or your state tax software to see whether interest income is taxed at the state level. If you live in a state with no income tax, you only report interest on your federal return.

Frequently Asked Questions

Do I have to report interest if the bank did not send me a 1099-INT?

Yes. Banks only send a 1099-INT when interest reaches $10 or more. If your interest is under $10, no form arrives, but you still owe tax on it and must report it on your return. Use your bank statement to calculate the interest earned.

What if I have interest from multiple banks?

Add up all the interest from all your accounts and report the total as one line item on your return. You do not report each bank separately. If any single bank's interest reached $10, they will send you a 1099-INT for that account.

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 interest itself or the tax you pay on it. The only way to reduce the tax is to reduce your total income or move money to tax-advantaged accounts like IRAs or 401(k)s.

What if I earned interest but the bank made a mistake on the 1099-INT amount?

Contact the bank and ask them to issue a corrected Form 1099-INT (marked as a correction). They will send the corrected form to you and the IRS. Report the corrected amount on your tax return. If you already filed, you may need to file an amended return.

Do I report interest on a savings account I closed during the year?

Yes. Report all interest earned in that calendar year, even if you closed the account in December. The bank will include all interest earned through the closing date on the 1099-INT.