You must file taxes and report savings account interest if the interest earned is $10 or more in a year, or if you meet other filing requirements based on your income and filing status.
The IRS requires you to report interest income on your tax return when it reaches $10 or more in a single tax year. Your bank sends you a Form 1099-INT in January or early February showing exactly how much interest you earned. Even if you don't receive the form, you still owe tax on the interest — the bank reports it to the IRS whether or not they mail it to you.
However, you may need to file taxes anyway even if your interest is under $10, depending on your total income, age, and filing status. A single person under 65 with less than $13,850 in income for 2023 generally doesn't have to file, but that threshold includes all income — wages, interest, dividends, and self-employment income combined. If you're over 65, the threshold is higher. Married couples filing jointly have different thresholds. The safest approach is to file if you earned any interest at all, because filing protects you from penalties and ensures you don't miss out on refundable tax credits.
Key Takeaways
- Interest income of $10 or more must be reported on your tax return, and your bank will send you Form 1099-INT showing the exact amount.
- You may have to file taxes even if your interest is under $10 if your total income exceeds the threshold for your age and filing status.
- The IRS receives a copy of your 1099-INT from the bank, so unreported interest will likely trigger a mismatch notice.
- Interest income is taxed as ordinary income at your regular tax rate, not at a lower capital gains rate.
- If you earned interest but didn't receive a 1099-INT by mid-February, contact your bank to request a copy or ask for the amount.
How the IRS knows about your savings account interest
Banks are required by law to report interest payments to the IRS on Form 1099-INT. They send a copy to you and a copy to the IRS. If you don't report the interest on your tax return, the IRS will eventually notice the mismatch between what you reported and what the bank reported. This can trigger a notice asking you to explain the difference or pay additional tax plus penalties.
The IRS doesn't monitor your account balance or deposits — only interest payments. Moving money in and out of savings doesn't create a tax reporting requirement. Only the interest your money earns does.
What counts as interest income
Interest from savings accounts, money market accounts, and certificates of deposit (CDs) all count as taxable interest income. So does interest from bonds, treasury bills, and any other investment that pays you interest rather than dividends. High-yield savings accounts report interest the same way regular savings accounts do — the higher the rate, the more interest you'll owe tax on.
Interest is taxed at your ordinary income tax rate, which depends on your total income and filing status. If you're in the 22% tax bracket, you'll owe roughly 22% of your interest income in federal tax (plus any state income tax your state charges). This is different from capital gains, which may be taxed at lower rates.
When you don't have to file but should anyway
If your only income is $8,000 in interest and you're a single person under 65, you technically don't meet the filing threshold of $13,850. But filing anyway is usually the right move. If you had taxes withheld from other income during the year, filing lets you claim a refund. If you're a dependent on someone else's return, filing protects your own tax situation.
Filing is also free through the IRS Free File program if your income is below a certain level, or you can file yourself using tax software. The cost of not filing — a penalty notice, interest charges, or a missed refund — usually outweighs the time it takes to file.
How to report interest on your tax return
When you file, you'll report your interest income on Schedule B (Form 1040) if you have more than $1,500 in interest and dividend income combined. If you have $1,500 or less, you can report it directly on Form 1040 line 2b without filing Schedule B. You'll need the amount from your 1099-INT form, which your bank mails by January 31.
If you have multiple savings accounts at different banks, each bank sends its own 1099-INT. You add up all the interest from all the forms and report the total. If one bank didn't send you a form but you know you earned interest there, contact the bank and ask for the amount — you still have to report it even without the form.
What happens if you don't report interest income
The IRS will likely catch the unreported interest because the bank reports it to them. You'll receive a notice asking you to pay the tax you owe plus interest on the unpaid amount. If the IRS determines the omission was intentional, you may also face a penalty of 20% or more of the unpaid tax.
If you simply forgot or didn't realize you had to file, filing an amended return (Form 1040-X) as soon as you realize the mistake usually results in a smaller penalty than waiting for the IRS to contact you. The sooner you correct it, the less interest accrues on what you owe.
Interest income and other tax situations
If you're a dependent on your parents' tax return, you still have to report your own interest income on your own return. Your parents cannot claim your interest income on their return. However, if your interest income is very small, it may fall below the threshold where you have to file your own return — check the dependent filing rules for your age and income.
If you're retired and living on Social Security plus interest income, the interest is still taxable. Some of your Social Security may also become taxable depending on your combined income, which includes interest. This is one reason to file even if your interest is small — it affects how much of your Social Security is taxed.
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 may still need to file a tax return based on your total income and filing status. If you meet the income threshold for filing, you should file even if your interest is under $10.
What if my bank didn't send me a 1099-INT?
Contact your bank and ask for a copy or the interest amount. Banks must send 1099-INT forms by January 31. If yours didn't arrive by mid-February, call or visit your bank's website. You still owe tax on the interest whether or not you receive the form.
Is interest income taxed differently than wages?
Interest is taxed as ordinary income at your regular tax rate, the same as wages. It is not taxed at the lower capital gains rate. The tax rate depends on your total income and filing status, not on the type of income.
Do I have to report interest from a joint savings account?
Yes, but only the person whose Social Security number is on the account receives the 1099-INT. If the account is truly joint and you both contributed, you may need to split the interest income between you for tax purposes. Consult a tax professional if you're unsure how to report it.
Can I deduct savings account fees from my interest income?
No, you cannot deduct savings account fees or other banking fees from your interest income on your tax return. You report the full interest amount shown on your 1099-INT. However, some fees may be deductible as miscellaneous expenses if you itemize deductions, though this is rare and subject to limitations.