You report all savings account interest as income, no matter how small

The IRS requires you to report every dollar of interest your savings account earns. There is no minimum threshold — even $1 in interest must be reported on your tax return. Your bank will send you a Form 1099-INT in January showing the interest you earned during the previous year, and you use that figure to fill out your tax forms.

The interest is taxed as ordinary income at your regular tax rate, which means it gets added to your wages, self-employment income, and any other money you made that year. If you earned $50,000 in salary and $200 in savings interest, the IRS treats that $200 the same way it treats your paycheck — it all counts toward your total taxable income for the year.

Key Takeaways

  • All savings account interest, regardless of amount, must be reported to the IRS on your tax return.
  • Your bank sends a Form 1099-INT by January 31 showing the interest you earned; use this to complete your taxes.
  • Interest is taxed at your ordinary income tax rate, not at a special lower rate.
  • If you earned interest but did not receive a 1099-INT, you still must report it based on your bank statements.
  • High-yield savings accounts and money market accounts produce more interest, which means a larger tax bill.

When your bank sends you the 1099-INT form

Banks and credit unions mail Form 1099-INT to customers by January 31 each year. The form shows the total interest paid to your account during the previous calendar year. If you have multiple savings accounts at different banks, you will receive a separate 1099-INT from each one.

The form goes to you and also to the IRS, so the agency already knows how much interest you earned. This is why reporting it yourself is not optional — the IRS will notice if your tax return does not match what the bank reported. If you earned interest but your bank did not send a 1099-INT (which can happen if the amount was very small, though rare), you still must report the interest based on your bank statements.

How interest income affects your tax bracket and refund

Interest income pushes your total taxable income higher, which can move you into a higher tax bracket or reduce a refund you were expecting. If you earned $45,000 in wages and are single, you might have been counting on a certain refund. But if you also earned $5,000 in interest, your total income is now $50,000, and you owe tax on that full amount.

The effect is most noticeable if you have a large savings balance earning interest at a high rate. Someone with $100,000 in a high-yield savings account earning 4.5% APY will earn $4,500 in interest per year. At a 22% federal tax rate (the rate for single filers earning $45,000 to $95,000 in 2024), that $4,500 costs roughly $990 in federal income tax alone, plus state and local taxes if your state has an income tax.

Interest from different account types and what gets reported

Regular savings accounts, money market accounts, and certificates of deposit (CDs) all generate interest that must be reported. High-yield savings accounts produce more interest than traditional savings accounts, so they create a larger tax bill. Interest from a regular checking account is rare but also taxable if it occurs.

Interest from bonds, Treasury bills, and investment accounts follows different rules and uses different tax forms (like Form 1099-OID for original issue discount or Form 1099-DIV for dividends), but the principle is the same: you report it all. The only money that does not generate taxable interest is cash sitting in a non-interest-bearing checking account.

State and local taxes on savings interest

Most states that have an income tax also tax savings account interest at your state rate. A few states do not tax interest income — currently, Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax. If you live in one of these states, you owe only federal tax on your interest.

If you live in a state with an income tax, you will owe both federal and state tax on your interest. Some states tax interest at a lower rate than wages, but most treat it the same. Check your state's tax agency website or your most recent state tax return to see what rate applies to you.

What to do if you earned interest but have no 1099-INT

If you earned interest during the year but your bank did not send a 1099-INT by late February, contact the bank and ask for it. Banks are required to send the form by January 31, so if you have not received it by mid-February, follow up. You can also log into your online banking and check your year-end statements, which often show total interest earned.

If the bank confirms it will not send a 1099-INT because the interest was below a certain threshold (some banks do not issue forms for very small amounts), you still report the interest on your tax return. Use your bank statements as proof of the amount. The IRS may not have a record of it, but that does not mean you can skip reporting it — you are required to report all interest income.

How to report interest income on your tax return

On the federal level, you report interest income on Schedule B (Interest and Ordinary Dividends) if you have more than $1,500 in interest and dividends combined. If you have less than that, you can report the interest directly on Form 1040, line 2b. You list each 1099-INT you received and add up the total.

For state taxes, the process varies by state. Most states have a similar form or section on their income tax return where you report interest. You will use the same 1099-INT forms and the same total interest figure. If you file your taxes using software like TurboTax or TaxAct, the program walks you through entering the 1099-INT information and places it in the correct spot on your return automatically.

Frequently Asked Questions

Do I have to report interest if I earned less than $100?

Yes. The IRS requires you to report all interest income, no matter how small. There is no minimum amount that is too small to report. Your bank may not send a 1099-INT for very small amounts, but you still report it based on your bank statements.

Can I deduct the taxes I pay on savings interest?

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 paid investment fees or had other investment expenses, some of those may be deductible under certain conditions — consult a tax professional about your specific situation.

What if I moved money between banks during the year?

Each bank reports only the interest it paid you while you held money there. If you had $10,000 at Bank A for six months earning $150 and then moved it to Bank B for six months earning $160, you will receive two 1099-INT forms — one from each bank. You report both on your tax return, for a total of $310 in interest income.

Does interest from a joint savings account get split between owners?

The bank reports the full interest amount on a 1099-INT to the Social Security number listed as the primary account holder. If you own the account jointly, you and the other owner need to decide how to split the interest for tax purposes and report your portion. The IRS does not automatically split it — you handle that between yourselves.

Will my interest income affect my student loan payments or other benefits?

Interest income counts as income for most benefit calculations, including income-driven student loan repayment plans, Medicaid, and subsidized housing programs. If you are on an income-based repayment plan or receive means-tested benefits, report the interest to the relevant program when they ask for your income information.