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

The IRS requires you to report every dollar of interest your savings account earns, no matter how small. Your bank will send you a Form 1099-INT in January if your account earned $10 or more in interest during the previous year. Even if you don't receive a 1099-INT, you still owe tax on the interest—the $10 threshold is just when the bank is required to report it to the IRS.

Interest counts as ordinary income, which means it's taxed at your regular income tax rate. If you earned $50 in savings interest and you're in the 22% tax bracket, you owe roughly $11 in federal tax on that interest. Some states also tax savings interest, though a handful of states exempt it entirely.

The only exception is interest earned in a Roth IRA or traditional IRA—those accounts are tax-sheltered, so interest grows without triggering a tax bill each year. Interest in a regular savings account, money market account, or certificate of deposit (CD) is always taxable in the year you earn it.

Key Takeaways

  • You must report all savings account interest on your federal tax return, even amounts under $10 that don't appear on a 1099-INT form.
  • Your bank sends Form 1099-INT only when interest reaches $10 or more, but the absence of this form does not mean you skip reporting the interest.
  • Savings interest is taxed as ordinary income at your regular tax rate, not at a lower capital gains rate.
  • Interest earned inside IRAs and Roth IRAs is not taxed annually and does not need to be reported until you withdraw money in retirement.
  • Some states do not tax savings interest, so check your state's rules to see whether you owe state tax on top of federal tax.

How to report interest on your tax return

When you file your federal return, you report savings interest on Schedule 1 (Form 1040) under "Interest." If you're using tax software, the program will ask you to enter your interest income and automatically place it in the right spot. If you're filing by hand, you add up all your interest from all your accounts and write the total on the line for interest income.

Attach your 1099-INT forms to your return if you're mailing it in. If you file electronically, you don't mail the forms, but keep them for your records in case the IRS asks questions later. The IRS receives a copy of every 1099-INT your bank sends, so they already know how much interest you earned.

If you have interest from multiple accounts—a savings account at one bank, a CD at another, a money market account elsewhere—add them all together and report the total. You don't file separate lines for each account.

When your bank sends Form 1099-INT

Banks mail 1099-INT forms by January 31 each year for interest earned during the previous calendar year. The form shows the account holder's name, Social Security number, the bank's name, and the total interest paid. You receive one copy and the IRS receives another.

If you earned less than $10 in interest, your bank is not required to send a 1099-INT. However, you still owe tax on that interest. Some banks send 1099-INT forms for all accounts regardless of the amount, while others only send them when the threshold is met. Check your bank's policy or call to ask.

If you don't receive a 1099-INT by early February, contact your bank. Provide your correct mailing address and confirm they have your Social Security number on file. If the form was lost in the mail, the bank can issue a duplicate.

Interest from joint accounts and accounts for minors

If you own a joint savings account, the interest belongs to whoever owns the account. If both owners contributed equally and own it together, you may split the interest 50-50 for tax purposes—but only if you both agree and report it that way. The bank typically reports all the interest to one owner's Social Security number on the 1099-INT, so you'll need to coordinate with the other owner to make sure you're each reporting the right amount.

If you opened a savings account for a minor child, the interest is the child's income, not yours. The child must report it on their own tax return if they file one. If the child's total income is below the threshold for filing (which varies by age and type of income), they may not need to file—but check the IRS rules for dependents, because the rules are different from those for adults.

A parent or guardian cannot claim the child's interest income on the parent's return. The child is responsible for reporting it, even if the parent manages the account.

State taxes on savings interest

Most states tax savings interest the same way the federal government does—as ordinary income. However, some states exempt interest from taxation entirely. As of now, states including Illinois, Mississippi, and Tennessee do not tax interest income, though these rules change occasionally.

If you live in a state that taxes interest, you report it on your state income tax return using a form similar to the federal process. Your state tax return will have a line for interest income, and you enter the same amount you reported to the IRS. Check your state's tax agency website or call their helpline to confirm whether your state taxes savings interest.

If you moved during the year or lived in more than one state, you may owe tax to multiple states. This is rare and usually applies only to people who moved partway through the year. Your state tax software or a tax professional can help you sort out which state gets which portion of your income.

Interest in tax-advantaged retirement accounts

Money in a traditional IRA or Roth IRA grows tax-free each year. If your IRA holds a savings account or CD, the interest does not trigger a tax bill while the money sits in the account. You don't receive a 1099-INT for IRA interest, and you don't report it on your tax return.

With a traditional IRA, you pay tax on the interest when you withdraw the money in retirement. With a Roth IRA, you pay no tax on withdrawals at all—the interest grows and comes out tax-free if you follow the rules.

The same tax-free growth applies to interest in a 529 college savings plan or Coverdell ESA (education savings account), as long as you use the money for education expenses. If you withdraw money for non-education purposes, you may owe tax on the interest portion.

What happens if you don't report interest income

The IRS matches the 1099-INT forms your banks send against the income you report on your return. If you report less interest than the IRS received from your bank, you'll likely receive a notice asking you to explain the difference. The IRS will then bill you for the unpaid tax, plus interest on the unpaid amount and possibly penalties.

If the discrepancy is small and you can show it was an honest mistake, the IRS may waive penalties. If it looks intentional or happens repeatedly, penalties increase. The safest approach is to report all interest, even if you think the amount is too small to matter.

If you genuinely didn't receive a 1099-INT and didn't know about the interest, keep records showing you tried to find out about it—bank statements, correspondence with the bank, or a written explanation. This documentation helps if the IRS questions you later.

Frequently Asked Questions

Do I report interest if I closed the account before the end of the year?

Yes. You report all interest earned during the calendar year, regardless of when you close the account. If you earned $15 in interest before closing the account in June, the bank will send a 1099-INT in January for that $15, and you report it on your tax return.

What if I earned interest in a savings account but the bank didn't send a 1099-INT?

You still report it. The $10 threshold only determines whether the bank must send a form—it doesn't determine whether you owe tax. Check your bank statements for the interest amount and report it on your return. Keep the statements in case the IRS asks for proof.

Can I deduct savings account fees from the interest I report?

No. You report the full interest amount the bank paid you. Fees are not deductible against interest income on your personal tax return, though business owners may deduct bank fees as a business expense if the account is for business use.

Is interest from a high-yield savings account taxed differently?

No. High-yield savings accounts pay more interest than traditional savings accounts, but the interest is taxed the same way—as ordinary income at your regular tax rate. You report it on Schedule 1 just like interest from any other savings account.

Do I need to report interest if my spouse and I file jointly?

Yes, but only once. If you and your spouse each have separate savings accounts, add both amounts together and report the total on your joint return. If you have a joint account, report the interest once on the joint return, not on both individual returns.