Yes, you must report savings account interest on your tax return if you earned more than $10
The IRS requires you to report all interest income, no matter how small. Your bank will send you a Form 1099-INT if you earned $10 or more in interest during the tax year. Even if your bank does not send you a form, you still owe tax on the interest — the $10 threshold is only when the bank is required to report it to the IRS, not when you are required to pay tax on it.
Interest counts as ordinary income and is taxed at your regular income tax rate. This applies to savings accounts, money market accounts, certificates of deposit (CDs), and any other account where the bank pays you interest. The interest is taxable in the year you earn it, even if you do not withdraw the money.
If you earned less than $10 in interest, your bank will not send you a 1099-INT, but you should still report the interest on your return if you file one. Many people with small interest amounts do not file a return at all because their income falls below the filing threshold, which varies by age and filing status.
Key Takeaways
- Banks send Form 1099-INT when interest reaches $10 or more, but you owe tax on all interest income regardless of the form.
- Interest is taxed as ordinary income at your regular tax rate, not at a special rate.
- You report interest on your tax return on Schedule 1 (Form 1040) or on your state return if your state has an income tax.
- If you earned interest but your total income is below the filing threshold for your situation, you may not be required to file a federal return.
- High-yield savings accounts and money market accounts generate more interest, which means higher tax liability.
When your bank sends you Form 1099-INT
Your bank mails Form 1099-INT by January 31 each year if you earned $10 or more in interest during the previous calendar year. The form shows the total interest paid to you and goes to both you and the IRS. You will receive one form per bank, even if you have multiple accounts at the same institution.
If you have accounts at several banks, you may receive multiple 1099-INT forms. Each one reports only the interest from that bank. When you file your return, you add up all the interest from all your forms and report the total.
Keep your 1099-INT forms with your tax records. You do not attach them to your return, but the IRS uses them to verify that you reported the income correctly. If the IRS sees a 1099-INT in their records that does not match your return, they may send you a notice.
How to report interest on your tax return
On your federal return, you report interest income on Schedule 1 (Form 1040), which is part of the main 1040 form. The line for interest income is near the top of the schedule. You add up all interest from all your 1099-INT forms and enter the total on that line.
The interest then flows to your total income, which determines your tax bracket and affects other calculations on your return, such as whether you can claim certain deductions or credits. This is why even small amounts of interest matter — they can push you into a higher tax bracket or reduce credits you would otherwise receive.
If you file a state return, most states also require you to report interest income. The process is similar: you report the total interest on the state form, usually on a line labeled "interest and dividend income" or similar. A few states do not tax interest income, so check your state's rules.
Interest from high-yield savings accounts and CDs
High-yield savings accounts and certificates of deposit pay significantly more interest than traditional savings accounts, which means your tax bill will be higher. A high-yield account earning 4% to 5% annually on a $10,000 balance generates $400 to $500 in taxable interest per year. At a 22% tax rate, that is $88 to $110 in federal tax alone.
This does not mean you should avoid high-yield accounts — the after-tax return is still better than a traditional account. But it does mean you should plan for the tax liability. If you earn interest in December, that interest is taxable in that year even though you do not receive the 1099-INT until the following January.
CDs work the same way. Interest accrues and is taxable each year, even if you do not withdraw the money until the CD matures. Some people buy CDs in a tax-deferred account like an IRA to avoid this annual tax hit, though IRA rules limit how much you can contribute each year.
What happens if you do not report interest income
If you do not report interest income and the IRS has a matching 1099-INT on file, they will likely catch the discrepancy. The IRS runs automated matching programs that compare 1099 forms to reported income. If your return shows no interest income but your bank reported interest to the IRS, you will receive a notice.
The IRS will calculate the tax you owe plus interest on the unpaid tax. They may also assess a penalty for underpayment, which is typically 20% of the unpaid tax. If the omission was intentional, the penalty can be higher. The safest approach is to report all interest, even if it is small.
If you earned interest but did not receive a 1099-INT because it was under $10, the IRS has no independent record of it. However, you are still legally required to report it. The risk of audit is lower, but the obligation remains.
Interest in joint accounts and accounts held by minors
If you have a joint savings account, the interest belongs to whoever owns the account according to the account agreement. Usually both owners split the interest equally, and each receives a separate 1099-INT showing their share. Each owner reports their portion on their own tax return.
If a parent opens a savings account for a minor child, the interest is the child's income and must be reported on the child's tax return, not the parent's. A child with interest income may be required to file their own return even if their parents claim them as a dependent. The child's filing threshold is lower than an adult's.
Some parents use a Coverdell Education Savings Account or 529 plan to hold money for a child's education. Interest in these accounts grows tax-deferred, meaning you do not pay tax on the interest each year. You only pay tax when you withdraw the money for education expenses, and in many cases those withdrawals are not taxed at all.
Interest from IRAs and retirement accounts
Interest earned inside a traditional IRA or 401(k) is not taxed each year. Instead, you pay tax on the entire withdrawal when you take money out in retirement. This is one major advantage of retirement accounts — the interest compounds without being reduced by annual taxes.
Roth IRAs work differently: interest grows tax-free and may have access to withdrawals are not taxed at all. You never report the interest on your tax return because it is sheltered from tax permanently.
If you have both regular savings accounts and retirement accounts, only report the interest from the regular accounts on your tax return. The retirement account interest is handled separately and does not appear on a 1099-INT.
Frequently Asked Questions
Do I have to file a tax return if I only earned interest income?
It depends on how much interest you earned and your age. For 2024, a single person under 65 must file if their gross income is $14,600 or more. If you earned less than that in interest alone, you are not required to file. However, if you have other income or are over 65, the threshold is higher.
What if I earned interest but my bank did not send a 1099-INT?
If you earned less than $10, your bank is not required to send a form, but you should still report the interest if you file a return. If you earned $10 or more and did not receive a form by February 1, contact your bank. They may have the wrong address or may need to issue a corrected form.
Can I deduct interest I paid on a loan from my savings account interest?
No. Interest you earn on savings is income and must be reported. Interest you pay on a loan (like a mortgage or student loan) may be deductible, but that is a separate calculation. You report the interest income and any deductible interest separately on your return.
Does interest from a savings account count toward my income for Social Security or Medicare purposes?
Yes. Interest is counted as income for determining whether your Social Security benefits are taxed and for calculating Medicare premiums. If you have substantial interest income, it may trigger taxation of your Social Security benefits or increase your Medicare premiums.
What if I moved money between accounts during the year — do I report interest twice?
No. You report the interest each bank paid you, not the number of accounts. If you moved $5,000 from Bank A to Bank B in June, Bank A reports only the interest it paid before the transfer, and Bank B reports only the interest it paid after. Together, the two forms show all the interest you earned.