Interest from a savings account is taxable income, and you report it on your federal tax return

Money your bank pays you for keeping funds in a savings account counts as interest income. The IRS treats it the same way it treats wages or other money you receive — you owe federal income tax on it. Your bank will send you a form called a 1099-INT each January showing how much interest you earned the previous year, and you use that number when you file your tax return.

The amount of tax you owe depends on your total income for the year and your tax bracket. If you earned $100 in interest and your tax bracket is 22%, you would owe roughly $22 in federal tax on that interest. Some states also tax interest income, though a handful do not.

The key point: your bank reports this to the IRS automatically, so the IRS already knows about it. You cannot avoid reporting it, and leaving it off your return creates a mismatch the IRS will catch.

Key Takeaways

  • Your bank sends you a 1099-INT form in January showing all interest earned in the previous year, and you must report this on your federal tax return.
  • The tax you owe on interest depends on your tax bracket — someone in the 12% bracket pays roughly 12% tax on the interest, someone in the 22% bracket pays roughly 22%.
  • Most states tax interest income the same way the federal government does, though a few states do not tax interest at all.
  • If you earned less than $10 in interest during the year, your bank may not send you a 1099-INT, but you still owe tax on that interest if you had other income.

How much interest triggers a 1099-INT form

Banks are required to send you a 1099-INT if you earned $10 or more in interest during the calendar year. If you earned $9.50, your bank does not have to send the form. However, you still owe tax on that $9.50 if you had any other income during the year.

The $10 threshold applies to each bank separately. If you have savings accounts at three different banks and earned $5 at each one, none of them will send you a 1099-INT — but you still owe tax on all $15 combined.

Your bank will mail the 1099-INT to you by January 31st. You will receive Copy B (for your records) and Copy C (to file with your tax return if you are mailing it in). The form shows the account number, the bank's name, and the total interest paid.

Where to report interest income on your tax return

If you file Form 1040 (the main federal income tax form), you report interest income on Schedule 1, Part I, line 8. You add up all interest from all sources — savings accounts, money market accounts, CDs, bonds — and enter the total on that line. Then you transfer that number to your main Form 1040.

If your total interest income is $1,500 or less and you have no other investment income, you can report it directly on Form 1040 without filing Schedule 1. The instructions that come with your tax forms will tell you which route applies to you.

If you use tax software, the program will ask you to enter the amounts from your 1099-INT forms, and it will place the numbers in the correct spots automatically.

State taxes on savings account interest

Most states tax interest income at the same rate they tax wages. If your state has a 5% income tax, you owe roughly 5% tax on your interest income to that state. A few states — including Pennsylvania, Illinois, and Mississippi — do not tax interest income at all, which means residents of those states owe federal tax on interest but not state tax.

If you live in a state that taxes interest, you will report it on your state income tax return. The process varies by state, but most state tax forms have a line for interest income similar to the federal form. Your 1099-INT shows the total interest, and you use that same number for both your federal and state returns.

If you moved during the year, you may owe tax to two states. The state where you lived on December 31st is the one that taxes your full-year income. Some states offer credits for taxes paid to other states, so check your state's rules if you moved.

Interest income and tax brackets

Interest income is added to all your other income for the year to determine your tax bracket. If you earned $50,000 in wages and $500 in interest, your taxable income is $50,500. That $500 in interest pushes you slightly higher in the tax bracket, which means you pay tax on it at your marginal rate — the rate that applies to your highest dollars of income.

For 2024, if you are single and earned $50,000 in wages plus $500 in interest, you fall into the 22% tax bracket. That means you owe roughly $110 in federal tax on the interest ($500 × 0.22). The exact amount depends on deductions and credits you claim, but the interest is taxed at your bracket rate.

This is why interest income can push you into a higher bracket if you are close to the edge. If you earned $46,225 in wages (the top of the 12% bracket for single filers in 2024) and then earned $5,000 in interest, that $5,000 would be taxed at 22% instead of 12%, costing you an extra $500 in tax.

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

If you earned $10 or more in interest and your bank did not send you a 1099-INT by February 15th, contact the bank directly. Ask them to issue the form or provide a statement showing the interest paid. Keep a record of your request in case the IRS asks about it later.

If you earned interest at a bank that has since closed or merged, the successor bank should still send you the form. If you cannot locate it, you can file your tax return using your own records — a bank statement showing the interest is acceptable proof if the IRS questions it.

Do not skip reporting interest just because you did not receive a 1099-INT. The IRS has copies of all 1099-INTs sent to it, and if your return does not match, you will receive a notice. It is easier to report the interest correctly the first time.

Interest income and refunds

If you owe tax on interest income and that tax pushes you over what you have already paid through withholding or estimated payments, you will owe money when you file your return. If you have overpaid, you will receive a refund. The interest income is treated like any other income — it affects your refund or balance due.

If you are expecting a refund and you earned interest income, that interest will reduce your refund slightly (because it increases your tax liability). The reduction is usually small unless the interest was substantial.

Frequently Asked Questions

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

Your bank does not have to send you a 1099-INT if you earned less than $10, but you still owe tax on that interest if you had any other income during the year. Report it on your tax return using your bank statement as proof.

What if I have interest income from multiple banks?

Add up all the interest from all your banks and report the total on line 8 of Schedule 1. Each bank sends its own 1099-INT, but you combine them into one number on your return. Keep all the 1099-INT forms with your records.

Does interest income affect my refund?

Yes. Interest income increases your taxable income, which increases the tax you owe. If you were expecting a refund, the interest will reduce it slightly. If you owed money, the interest will increase what you owe.

Can I deduct savings account fees from the interest I report?

No. You report the full interest amount on your tax return. Savings account fees are not deductible for most taxpayers. You report interest as a positive number and fees stay separate.

What if my interest income is very high — over $1,500?

If you have more than $1,500 in interest income, you must file Schedule 1 with your Form 1040. You may also have to file Schedule B if you have other investment income like dividends. Your tax software will guide you through this automatically.