You must report savings account interest if you earned $10 or more in a year, but most people with small balances won't reach that threshold
The IRS requires you to report interest income from a savings account only if the total interest you earned in that tax year reaches $10 or more. If your account earned less than $10, you do not have to report it. The bank will send you a Form 1099-INT in January if you crossed that $10 threshold — that form is your signal that the IRS expects to see the income reported on your tax return.
The reason the IRS cares is that banks report interest payments to the government too. If you earn $50 in interest and don't report it, the IRS will notice the mismatch between what the bank said you earned and what you claimed. Reporting the interest is straightforward: you enter the amount from your 1099-INT into your tax return, usually on Schedule 1 (Form 1040) or directly into tax software.
Interest rates and account balances vary widely, so whether you hit $10 depends on your specific situation. A savings account with $1,000 earning 4% annually generates $40 in interest — that triggers reporting. The same account earning 0.01% generates 10 cents — no reporting needed. High-yield savings accounts make it more likely you'll cross the threshold, especially if you have several thousand dollars saved.
Key Takeaways
- You report savings account interest only if you earned $10 or more in a single tax year; anything less does not have to be reported.
- Banks send Form 1099-INT in January if your interest reached $10, and the IRS receives a copy of that form.
- Interest income is reported on Schedule 1 of Form 1040 or entered directly into tax software under "interest income."
- High-yield savings accounts and larger balances make it more likely you will cross the $10 reporting threshold.
- Failing to report interest that appears on a 1099-INT can trigger an IRS notice, even if the amount is small.
How the $10 threshold works in practice
The $10 rule is a filing convenience, not a tax break. You technically owe tax on all interest income, even $5, but the IRS does not require you to report amounts under $10. However, if a bank issues you a 1099-INT showing $10 or more, you must report it — the threshold only applies when the bank does not send a form.
If you have multiple savings accounts at different banks, add up the interest from all of them. If Account A earned $6 and Account B earned $5, your total is $11, and you must report it. Each bank will only send a 1099-INT for its own account if that account alone crossed $10, but you are still responsible for reporting the combined total if it reaches $10 across all accounts.
The $10 threshold has not changed since 1986. It was set when interest rates and account balances were different, so it catches fewer people now than it did decades ago. Still, with current interest rates, even modest savings can generate reportable interest.
When you receive a Form 1099-INT and what to do with it
Banks mail 1099-INT forms by January 31 each year for the previous calendar year. The form shows the account holder's name, the bank's name, and the total interest earned. You will receive one copy in the mail and the bank sends another directly to the IRS. Keep your copy with your tax records.
If you use tax software, you can enter the amount from Box 1 of the 1099-INT directly into the interest income field. The software will place it in the right spot on your return automatically. If you file by hand or with a tax preparer, give them the 1099-INT and they will add it to your return.
If you received a 1099-INT but did not actually earn that much interest — for example, the bank made an error — contact the bank and ask them to issue a corrected form. Do not ignore it and report a different number; the IRS will see the mismatch. A corrected 1099-INT is called a 1099-INT with "CORRECTED" printed on it, and you report the corrected amount instead.
Interest income and your tax bracket
Interest income is taxed as ordinary income at your regular tax rate. If you are in the 12% tax bracket, $100 in interest costs you $12 in federal tax. If you are in the 22% bracket, it costs $22. The amount you owe depends on your total income for the year, not just the interest.
Some people assume that because the interest is small, the tax is negligible. That is true for amounts under $10, but once you cross that threshold and have to report it, every dollar counts. A person in the 22% bracket with $1,000 in a high-yield savings account earning 4% will owe roughly $88 in federal tax on that $40 interest.
State income tax may also apply to interest income, depending on where you live. Some states do not tax interest income at all, while others tax it at rates ranging from 1% to over 10%. Check your state's rules or ask a tax preparer about your specific situation.
What happens if you don't report interest income
If you received a 1099-INT and did not report the interest on your tax return, the IRS will likely send you a notice. The notice will show the interest the bank reported and ask why you did not include it. You will owe the tax plus interest on the unpaid amount, and possibly a penalty for underreporting.
The penalty for failing to report income is usually 20% of the underpaid tax, though it can be lower if you have a reasonable cause. If the amount is very small — say, $10 in interest — the IRS may not pursue it aggressively, but you cannot count on that. It is simpler and safer to report it when you file.
If you received a 1099-INT for interest you genuinely did not earn — because the account was closed before year-end or the bank made an error — you can dispute it. Contact the bank first to see if they will issue a corrected form. If they confirm the amount is wrong, keep documentation of that conversation and include a note with your tax return explaining the discrepancy.
Savings accounts that do not generate 1099-INT forms
Money market accounts, certificates of deposit (CDs), and some other savings products also generate interest and follow the same $10 reporting rule. If you have a CD that earned $15 in interest, you will receive a 1099-INT and must report it, just as you would for a regular savings account.
Certain accounts are exempt from 1099-INT reporting. Interest in a Roth IRA or traditional IRA is not reported on a 1099-INT because it grows tax-deferred inside the account. Interest in a 529 education savings plan is also not reported separately. If you have savings in those accounts, the interest stays inside and you do not file a separate form.
If you are unsure whether a particular account generates a 1099-INT, check your year-end statements or contact the bank. They can tell you whether interest was paid and whether a form will be issued.
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 income under $10 in a tax year. However, if a bank sends you a 1099-INT showing $10 or more, you must report that amount, even if you think it is wrong. Contact the bank to correct errors before filing.
What if I have multiple savings accounts at different banks?
Add up the interest from all accounts. If the total reaches $10 or more, you must report it. Each bank only sends a 1099-INT for its own account, but you are responsible for reporting the combined total on your tax return.
Can I deduct savings account fees from the interest I report?
No. You report the gross interest the bank paid you, not the net amount after fees. Savings account fees are not deductible on your personal tax return. Report the full amount shown on the 1099-INT.
What if the bank sent me a 1099-INT but I closed the account before the end of the year?
You still report the interest. The 1099-INT shows interest earned during the year, regardless of when the account was closed. Report the amount on the form with your tax return.
Do I need to report interest if I am a dependent on someone else's tax return?
Yes. Even if you are claimed as a dependent, you must report your own interest income if it reaches $10. Your parent or guardian cannot claim that interest as their own. You may file your own return, or your interest may be reported on a dependent's return depending on your total income.