You must report all savings account interest as income on your federal tax return

The IRS treats savings account interest the same way it treats wages or business income — it is taxable. Your bank will send you a Form 1099-INT in January or early February showing how much interest you earned during the previous year. You then report that amount on your tax return, usually on Schedule B (if you have other investment income) or directly on Form 1040 (if interest is your only investment income and it is under $1,500).

The threshold matters because if your interest income is $1,500 or less and you have no other investment income like dividends or capital gains, you can report it directly on the main form without filing Schedule B. Above $1,500, Schedule B becomes required. Either way, the interest gets added to your other income and taxed at your ordinary income tax rate.

State taxes work the same way — most states tax savings interest as regular income. A few states (like Pennsylvania and Illinois) do not tax interest income at all, but you still have to report it on your federal return regardless of where you live.

Key Takeaways

  • Your bank sends Form 1099-INT by early February showing all interest earned in the previous year, and you must report this on your federal tax return.
  • Interest under $1,500 with no other investment income goes directly on Form 1040; above $1,500 or with other investment income, you file Schedule B.
  • Interest is taxed as ordinary income at your regular tax rate, not at a special rate.
  • Most states tax savings interest, though a handful do not — check your state's rules, but report it federally either way.
  • If you earned interest but did not receive a Form 1099-INT, contact your bank or report the interest anyway based on your account statements.

When your bank sends Form 1099-INT and what it shows

Banks mail Form 1099-INT to you and file a copy with the IRS by January 31 each year. The form shows interest earned during the previous calendar year. If you have multiple savings accounts at different banks, you will receive a separate 1099-INT from each one. If you have multiple accounts at the same bank, they may combine the interest on a single form or send separate forms depending on the bank's system.

The form lists the interest amount in Box 1. That is the number you report on your tax return. If you earned less than $10 in interest for the year, your bank may not be required to send you a 1099-INT, but you still have to report the interest if you received it. Check your year-end account statements to find the total.

Keep the 1099-INT with your tax records. You do not send it to the IRS with your return — the IRS already has a copy from your bank — but you need it to fill out your return accurately and to prove your numbers if you are ever audited.

How to report interest on Form 1040 or Schedule B

If your total interest income is $1,500 or less and you have no other investment income (no dividends, capital gains, or rental income), you can report the interest directly on Form 1040, line 2b. Write the total interest from all your 1099-INT forms on that line. This is the simplest route and requires no additional forms.

If your interest is over $1,500, or if you have other investment income, you must file Schedule B (Interest and Ordinary Dividends) along with Form 1040. On Schedule B, Part I, list each source of interest income separately — each bank or savings account — and the amount from each 1099-INT. Add them up and transfer the total to Form 1040, line 2b. Schedule B also asks you to report the account numbers, which helps the IRS match your report to the 1099-INT forms they received from your banks.

Both routes end at the same place: the interest total goes on line 2b of Form 1040 and becomes part of your taxable income for the year. The tax you owe on that interest depends on your total income and your tax bracket.

What to do if you did not receive a Form 1099-INT

If you earned interest but your bank did not send you a 1099-INT, start by contacting the bank directly. Banks are required to send the form if you earned $10 or more, so if you earned that much and did not receive it, ask the bank to send a copy or issue a corrected one. Give them a few days — forms sometimes arrive late in the mail.

If the bank confirms it will not send a form because your interest was under $10, or if you cannot reach the bank, report the interest anyway on your tax return. Use your account statements to calculate the total interest for the year. The IRS expects you to report all income, whether or not you receive a 1099-INT. Reporting interest you earned but did not receive a form for protects you — it shows you are being honest if the IRS ever questions your return.

If you received a 1099-INT but the amount is wrong, contact your bank immediately. The bank can issue a corrected Form 1099-INT (marked as a correction) and send it to both you and the IRS. Do not file your tax return until you have the corrected form, because the IRS will compare your return to the 1099-INT they received, and a mismatch can trigger a notice.

How interest income affects your tax bracket and refund

Savings account interest is added to your other income — wages, self-employment income, Social Security, and anything else — to calculate your total taxable income. That total determines your tax bracket and how much tax you owe. Even a small amount of interest can push you into a higher bracket if your income is close to a threshold, which means you pay a higher rate on that interest and possibly on some of your other income too.

If you have taxes withheld from paychecks or make estimated tax payments, the interest you earn during the year may not be covered by those withholdings. This can mean you owe more tax when you file, or it can reduce a refund you would have received otherwise. High-yield savings accounts earn more interest than traditional savings accounts, so if you moved money to a high-yield account during the year, expect a larger 1099-INT and a larger tax bill.

Conversely, if you earned very little interest and have other reasons for a refund — such as overpaying through withholding — the interest will not eliminate your refund, but it will reduce it slightly.

State taxes on savings account interest

Most states tax interest income the same way the federal government does — as ordinary income at your state tax rate. A few states have different rules. Pennsylvania and Illinois do not tax interest income at all. New Hampshire taxes interest and dividends but not wages. A handful of other states offer limited exemptions for certain types of savings or for residents over a certain age.

Check your state's tax website or contact your state tax department to learn the rules for your state. Even if your state does not tax interest, you still have to report it on your federal return. If your state does tax it, you will report the same interest amount on your state return as you did on your federal return — the interest itself does not change, only whether your state taxes it.

If you moved to a new state during the year, you may owe tax to both states on the interest you earned while living in each one. File a part-year resident return for the state you left and a resident return for the state you moved to. Each state will tax only the interest earned during the months you lived there.

Frequently Asked Questions

Do I have to report interest if I earned less than $10?

Your bank is not required to send a Form 1099-INT for interest under $10, but you still have to report it on your tax return if you received it. Use your account statements to find the total and report it on Form 1040 or Schedule B, depending on your other income.

What if I have interest from multiple banks?

You will receive a separate 1099-INT from each bank. Add up all the interest amounts and report the total on your tax return. If the total is over $1,500, list each bank separately on Schedule B; if it is $1,500 or less and you have no other investment income, report the combined total directly on Form 1040, line 2b.

Can I deduct expenses related to my savings account?

No. Interest income is reported in full; you cannot deduct account fees, minimum balance penalties, or other costs related to the account. Those expenses are personal and not deductible on a federal tax return.

Does interest from a money market account get reported the same way?

Yes. Money market accounts are treated the same as savings accounts for tax purposes. Your bank will send a 1099-INT, and you report the interest on your tax return using the same forms and process.

What happens if the 1099-INT amount does not match my account statements?

Contact your bank immediately. The 1099-INT should match the interest posted to your account during the calendar year. If it does not, ask the bank to explain the difference or issue a corrected form. Do not file your return until the discrepancy is resolved.