You must report savings account interest on your federal tax return if you earned $10 or more in a single tax year
The IRS requires you to report interest income from savings accounts, money market accounts, and certificates of deposit (CDs) on your Form 1040 or Form 1040-SR. Your bank sends you a Form 1099-INT in January or February showing how much interest you earned during the previous year. If the interest totals $10 or more, you are required to include it on your return. If you earned less than $10, you do not have to report it, though you may choose to anyway.
The $10 threshold applies to each account separately. If you have three savings accounts at different banks and each earned $5 in interest, you do not have to report any of them. But if one account earned $12, you must report that one. The bank decides whether to send you a 1099-INT based on what that specific account earned.
Interest is taxed as ordinary income at your regular tax rate, not at a capital gains rate. This means the interest you earn gets added to your other income — wages, self-employment income, rental income — and taxed according to your tax bracket for that year.
Key Takeaways
- You must report savings account interest of $10 or more per account on your federal tax return using the amount shown on Form 1099-INT.
- Interest income is taxed as ordinary income at your regular tax rate, not as a capital gain.
- Your bank mails or emails Form 1099-INT by January 31 each year, showing interest earned during the previous calendar year.
- If you earned less than $10 in interest from an account, you do not have to report it, but reporting it will not hurt your return.
- Some states also tax savings account interest, so check your state's income tax rules in addition to federal requirements.
How to find the interest amount your bank reports
Your bank generates Form 1099-INT automatically based on the interest posted to your account during the calendar year (January 1 through December 31). The form shows the total interest earned, not the monthly breakdown. You will receive it by January 31 of the following year, either by mail or through your online banking portal if you have paperless statements set up.
If you do not receive a 1099-INT by early February, log into your bank's website and look for tax documents or 1099 forms in the statements or downloads section. Many banks let you view and download these forms online before they arrive by mail. If you still cannot find it, call your bank's customer service line and ask them to send or resend the form. You will need the form to file your return accurately.
Keep the 1099-INT with your tax records. You do not send it to the IRS, but you need it to fill out your return, and you should keep it for at least three years in case the IRS asks questions about your income.
Where to report interest income on your tax return
On Form 1040 or 1040-SR, interest income goes on Schedule 1, Part I, line 8. You add up the interest from all your accounts and enter the total on that line. If you use tax software, the program will ask you to enter the interest amounts and automatically place them in the correct spot. If you file by hand, write the total on line 8 of Schedule 1 and attach it to your Form 1040.
If you have a spouse and file jointly, combine the interest from both of your accounts and report the combined total. The interest is added to your household income for the year, which may affect your tax bracket, your standard deduction, or your may be able to access for certain tax credits.
State income tax requirements for savings interest
Most states that have an income tax also tax savings account interest. The rules are similar to federal rules: you report the interest on your state return, usually on a line labeled "interest and dividend income" or similar. A few states — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not have a state income tax at all, so you do not report savings interest to them.
Some states have their own threshold below which you do not have to report interest. For example, a state might not require you to report interest under $25, even if the federal threshold is $10. Check your state's tax department website or your state tax form instructions to see what the rule is where you live. If you move during the year, you may need to file returns in both states.
What happens if you do not report savings interest
The IRS receives a copy of every 1099-INT that your bank sends to you. If you do not report the interest on your return and the IRS notices the mismatch, they will send you a notice asking for the missing income. You will owe tax on the interest plus interest on the unpaid tax (called failure-to-pay interest), and possibly a penalty for not reporting it.
The penalty for not reporting income is usually 20 percent of the unpaid tax, though it can be lower if you have reasonable cause for the mistake. If the IRS contacts you, you can explain the error and pay what you owe. Most people who make this mistake do not face criminal charges — it is treated as a civil matter — but it is simpler to report the interest correctly the first time.
How savings interest affects your taxes and deductions
Adding interest income to your return can change your tax situation in several ways. If your total income crosses into a higher tax bracket, you will pay a higher rate on that additional income. Interest income can also affect whether you may have access to for certain tax credits, such as the Earned Income Tax Credit (EITC) or education credits, because those credits have income limits. If your interest pushes you over the limit, you may lose part or all of the credit.
Interest income does not reduce your standard deduction, but it does count toward your total income for the year. If you are over 65 or blind, you get an extra standard deduction, but that is based on age or status, not on how much income you have. The interest simply adds to your taxable income.
High-yield savings accounts and interest reporting
High-yield savings accounts earn more interest than traditional savings accounts, sometimes significantly more. The interest is reported the same way — on a 1099-INT — but the amount will be larger. If you have a high-yield account earning 4 or 5 percent annually, you will almost certainly exceed the $10 reporting threshold, even on a modest balance.
Some people open high-yield accounts specifically to earn interest on money they are saving for a goal. The interest is taxable income, so factor that into your planning. If you earn $500 in interest during the year, you will owe federal tax on that $500 at your regular rate, plus state tax if your state taxes interest. The actual tax owed depends on your tax bracket, but it is typically 10 to 24 percent federally, plus whatever your state charges.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
No, you do not have to report interest under $10 from a single account. However, you may report it anyway if you want to — it will not hurt your return. Some people report all interest income for record-keeping purposes, even amounts under the threshold.
What if my bank did not send me a 1099-INT but I earned interest?
Banks are only required to send a 1099-INT if interest is $10 or more. If you earned less, they will not send one. You still do not have to report it. If you earned $10 or more and did not receive the form by early February, contact your bank and ask them to send it or confirm the amount so you can report it yourself.
Does interest from a joint savings account get reported differently?
The bank reports the full interest amount on a single 1099-INT. If the account is in both names, the bank may split the interest between you and your spouse on separate forms, or report it all to one person. Check the form to see whose Social Security number is listed. If it is split incorrectly, contact the bank to correct it before you file.
Can I deduct any expenses related to my savings account?
No. Interest income is reported as-is with no deductions. You cannot deduct account fees, the cost of a safe deposit box, or any other expense related to holding the account. Those expenses are not deductible for most taxpayers.
Will reporting savings interest affect my tax refund?
It depends on your overall tax situation. If the interest pushes you into a higher tax bracket or reduces your may be able to access for a tax credit, you may owe more tax and get a smaller refund. If you are already paying enough tax through withholding, the interest may not change your refund. Use tax software or a tax professional to see how the interest affects your specific return.