You report savings account interest if you earned $10 or more in a year
The IRS requires you to report interest income from a savings account on your federal tax return if the total interest you earned in that year reaches $10 or more. Your bank will send you a Form 1099-INT in January or early February showing exactly how much interest you earned. That amount goes on your tax return whether you withdraw the money or leave it in the account.
If you earned less than $10 in interest, you are not required to report it, but you can choose to report it anyway. Some people report all interest income as a matter of habit or to keep their records consistent. The $10 threshold applies to the total from all your savings accounts combined — if you have three accounts that each earned $4 in interest, you do not have to report any of them.
Interest income is taxed as ordinary income at your regular tax rate. This is different from capital gains or dividends, which may have different tax treatment. The bank does not withhold taxes on savings account interest, so if you owe tax on that income, you pay it when you file your return or through quarterly estimated payments if you have other self-employment income.
Key Takeaways
- Report savings account interest on your tax return only if you earned $10 or more in a single year.
- Your bank sends Form 1099-INT showing your interest income, and you use that figure on your return.
- Interest income is taxed as ordinary income at your regular tax rate, not as a capital gain.
- The $10 threshold combines all your savings accounts, so you count interest from every account you own.
- If you earned less than $10, reporting is optional, but some people report it anyway for record-keeping.
How the Form 1099-INT works and when you receive it
Banks and credit unions issue Form 1099-INT to you and to the IRS by January 31 each year. The form shows the interest you earned during the previous calendar year. If you have multiple accounts at the same bank, they may combine the interest on one form or issue separate forms depending on how the accounts are set up. Some banks send the form by mail; others make it available through your online banking portal.
Check your 1099-INT carefully against your own records. If the amount is wrong — for example, if you closed the account mid-year and the interest shown does not match what you earned — contact the bank and ask them to issue a corrected form. The bank will send you a corrected 1099-INT and also send a corrected copy to the IRS. Do not file your tax return until you have the correct figure.
If you do not receive a 1099-INT by early February, contact your bank directly. Some banks send forms only to accounts that earned interest above a certain threshold, so if you earned a small amount, you may have to request it. Keep the form with your tax records for at least three years in case the IRS asks questions about your return.
Where to report interest income on your tax return
On Form 1040 (the main federal income tax form), interest income goes on Schedule 1, line 8, labeled "Interest." If you file using tax software, the program will ask you to enter the amount from your 1099-INT, and it will automatically place it in the correct location. If you file by hand, write the total interest from all your 1099-INT forms on that line.
If your total interest income is $1,500 or less and you have no other investment income, you can report it directly on Form 1040 without filing Schedule B. If you have more than $1,500 in interest or you also have dividend income, capital gains, or other investment income, you must file Schedule B (Interest and Ordinary Dividends) and list each account separately.
The interest amount is added to your other income to calculate your total taxable income for the year. This may push you into a higher tax bracket or affect whether you owe tax at all. If you are retired and living on a fixed income, even a small amount of interest can change your tax situation, so it is worth calculating before you file.
Interest from different types of savings accounts
Regular savings accounts, money market accounts, and certificates of deposit (CDs) all generate interest that must be reported if it reaches $10. High-yield savings accounts earn more interest than traditional savings accounts, so you are more likely to hit the $10 threshold. If you have a CD that matures during the year, the interest earned up to the maturity date is reported on a 1099-INT for that year.
If you own a CD that has not matured yet but you are required to report interest annually (called "original issue discount" or OID), your bank will tell you on the 1099-INT. Some CDs are structured so that interest accrues but is not paid until maturity; even so, you may have to report the accrued interest each year. Check the terms of your CD or ask your bank whether you will receive a 1099-INT each year or only when the CD matures.
Interest from joint accounts is reported to both account holders on separate 1099-INT forms, or sometimes split on one form. If you own a joint account with a spouse, each of you reports your share of the interest. If you own a joint account with someone else, the bank typically reports all the interest to the Social Security number listed first on the account, so you may need to work out the split with the other owner and file accordingly.
What happens if you do not report interest income
The IRS receives a copy of every 1099-INT your bank sends to you. If you do not report the interest on your tax return and the amount is $10 or more, the IRS will likely notice the discrepancy when they match your return against the forms they received from banks. This can trigger a notice asking you to explain the difference or pay additional tax plus penalties and interest.
The penalty for not reporting interest income is usually 20 percent of the underpaid tax, plus interest calculated from the original due date of your return. If the IRS determines the omission was intentional fraud rather than an honest mistake, the penalty can be as high as 75 percent. Even if you owed no tax on the interest (because your income was low enough), you still need to report it to avoid triggering an audit.
If you realize you missed reporting interest in a prior year, you can file an amended return (Form 1040-X) for that year. The sooner you file the amendment, the lower the interest charges will be. You do not need to wait for the IRS to contact you; filing an amendment voluntarily is usually treated more favorably than being caught during an audit.
Interest income and tax brackets or credits
Interest income counts as ordinary income and is added to your wages, self-employment income, and other sources when calculating your total taxable income. If you are close to the edge of a tax bracket, interest income can push you into a higher bracket and increase your tax rate on all your income above that threshold. For example, if you earn $42,000 in wages and $500 in interest, your taxable income is $42,500.
Interest income can also affect whether you remain may be able to access for certain tax credits. The Earned Income Tax Credit (EITC), the Child Tax Credit, and education credits all have income limits. If interest income pushes your total income above the limit, you may lose part or all of a credit you would have otherwise received. Before opening a high-yield savings account, consider whether the extra interest might reduce a credit you rely on.
If you are receiving Social Security benefits, interest income counts toward the combined income threshold that determines whether your benefits are taxed. Combined income is calculated as your adjusted gross income plus nontaxable interest plus half your Social Security benefits. If you are near the threshold, even a small amount of interest can trigger taxation of your benefits.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
No, the IRS does not require you to report interest under $10. However, you can choose to report it if you want to keep your records complete. Some people report all interest income as a matter of principle, even if it is below the threshold.
What if my bank did not send me a 1099-INT?
Contact your bank and ask them to issue one. Some banks only send forms to accounts above a certain interest threshold, so if you earned a small amount, you may need to request it. If the bank says they will not issue one because the amount is below their internal threshold, you can still report the interest based on your own account statements.
Can I deduct savings account fees from my interest income?
No, you cannot deduct fees directly from interest income on your tax return. However, if you paid investment-related fees (such as fees for a financial advisor managing your savings), those may be deductible as miscellaneous itemized deductions, subject to limitations. Most savings account fees are not deductible.
Do I report interest from a savings account in a different country?
Yes, you must report all interest income from accounts anywhere in the world on your U.S. tax return. If you have foreign financial accounts totaling more than $10,000 at any time during the year, you may also have to file Form FinCEN 114 (FBAR) separately. Consult a tax professional if you have foreign accounts.
What if I moved money between accounts during the year — do I report interest twice?
No, you report each dollar of interest only once. If you moved $5,000 from one savings account to another, you do not report the interest twice. Each bank reports the interest earned on their account during the time you held money there, and you combine all the 1099-INT forms to get your total interest for the year.