Yes, you must report all savings account interest as income, no matter how small the amount
The IRS requires you to report every dollar of interest your savings account earns, even if the bank does not send you a form. Interest is taxable income. The threshold for when a bank must send you a Form 1099-INT is $10 or more in a calendar year, but you owe tax on interest below that amount too.
If you earned $5 in interest and the bank did not issue a 1099-INT, you still report it. If you earned $50 across multiple accounts and only one bank sent a form, you still report all $50. The reporting requirement is separate from the form requirement.
The only exception is interest that is explicitly tax-exempt by law — such as interest from certain municipal bonds or Treasury securities held in specific accounts. Regular savings accounts, money market accounts, and certificates of deposit (CDs) all generate taxable interest.
Key Takeaways
- You must report all savings account interest on your tax return, even if it is under $10 and the bank does not send a 1099-INT form.
- Banks send Form 1099-INT when interest reaches $10 or more in a calendar year, but this threshold does not change your reporting obligation.
- Interest from regular savings accounts, money market accounts, and CDs is always taxable unless the account is specifically designated as tax-exempt.
- You report interest income on Schedule 1 (Form 1040) or Schedule B if you have more than $1,500 in interest income from all sources combined.
- Failing to report interest income can trigger an audit or penalty, even if the amount is small.
When the bank sends you a 1099-INT and when it does not
Banks must issue a Form 1099-INT if you earned $10 or more in interest during the calendar year. You will receive it by January 31 of the following year. The form shows the interest amount in Box 1 and goes to both you and the IRS.
If you earned less than $10, the bank is not required to send a form. You will not receive a 1099-INT, but you still owe tax on that interest. This is where many people make mistakes — they assume no form means no reporting requirement.
If you have multiple savings accounts at different banks, each bank reports only its own interest. You are responsible for adding them all together and reporting the total. If Bank A sends you a 1099-INT for $15 and Bank B sends one for $8, you report $23 total.
Where to report interest income on your tax return
The location depends on how much total interest you earned from all sources in the year. If your interest income is $1,500 or less, you report it on Schedule 1 (Form 1040), line 8a. You enter the total amount and attach any 1099-INT forms you received.
If your interest income exceeds $1,500, you must use Schedule B (Interest and Ordinary Dividends) instead. Schedule B requires you to list each account separately and show the interest from each one. You then transfer the total to Schedule 1.
If you file electronically, your tax software will ask you about interest income and route it to the correct place automatically. If you file by hand, make sure you use the right form based on your total interest amount.
Interest from different account types and what counts
Savings accounts, money market accounts, and CDs all generate interest that must be reported. So do interest-bearing checking accounts. Any account where the bank pays you for holding money there produces taxable interest.
Interest that accrues but is not yet paid out still counts. If a CD matures on December 31 and the interest is credited to your account that day, you report it for that tax year even if you do not withdraw it until January.
Some banks offer promotional interest bonuses — a flat $50 or $100 payment for opening an account. These bonuses are sometimes treated as interest and sometimes as a separate form of income. Check your 1099-INT or ask the bank which category they used, because it affects where you report it.
What happens if you do not report interest income
The IRS receives a copy of every 1099-INT that banks send out. If you do not report interest that appears on a form sent to the IRS, the agency will likely catch the discrepancy during processing. This can trigger a notice, an audit, or a penalty.
Even if your interest is under $10 and no 1099-INT was issued, you are still at risk if you are audited. The IRS can request bank statements and see all interest deposits. If you claimed you had no interest income but the statements show otherwise, you face back taxes plus penalties and interest charges.
Penalties for failing to report income start at 20% of the unpaid tax and can go higher if the IRS determines the omission was intentional. It is far simpler to report the interest when you file than to deal with an audit later.
How interest income affects your tax bracket and other benefits
Interest income counts as ordinary income and is added to your wages, self-employment income, and other sources. It can push you into a higher tax bracket, which means you pay a higher rate on all your income above the threshold.
Interest income can also affect your may be able to access for certain tax credits and deductions. For example, if you are close to the income limit for the Earned Income Tax Credit (EITC) or the Child Tax Credit, additional interest income might disqualify you or reduce the amount you receive.
If you are receiving Social Security benefits, interest income counts toward the combined income threshold that determines whether your benefits are taxed. The formula includes adjusted gross income plus nontaxable interest plus half of your Social Security benefits.
Strategies for managing interest income and taxes
If you have a large amount of savings, spreading it across different account types can help manage your tax situation. High-yield savings accounts, money market accounts, and CDs all produce interest, but some accounts may offer tax-advantaged structures — though these are rare for regular savings.
Tax-advantaged retirement accounts like traditional IRAs and 401(k)s allow interest to grow without triggering annual tax liability. Interest earned inside these accounts is not reported until you withdraw the money in retirement. If you have savings outside retirement accounts, moving some into a retirement account can reduce your annual taxable interest.
Keep records of all 1099-INT forms you receive and any interest statements from accounts that did not issue forms. If you earned interest under $10 at multiple banks, write down each amount so you can report the total accurately.
Frequently Asked Questions
Do I report interest if the bank did not send me a 1099-INT?
Yes. The $10 threshold for issuing a 1099-INT is a reporting requirement for the bank, not a threshold for your tax obligation. If you earned any interest, you report it, whether or not you received a form. Keep your bank statements as proof.
What if I earned interest in two different years but the form arrived late?
Report the interest in the year it was earned, not the year you received the form. If a 1099-INT for 2023 interest arrives in February 2024, you report it on your 2023 tax return. The form date does not change when you report it.
Can I deduct fees I paid to the bank from my interest income?
No. Interest income is reported as a gross amount. Bank fees are not deductible against interest income on your personal tax return. You report the full interest amount and pay tax on it, even if fees reduced your net gain.
Does interest from a joint account get split between the two owners?
The bank reports the full interest amount on a single 1099-INT. You and the other account owner must decide how to split it based on your ownership agreement. If you own it 50-50, you each report half. Keep documentation of the split in case the IRS asks.
What if I earned interest but closed the account before the end of the year?
You still report all interest earned in that calendar year, even if you closed the account in November. The interest is taxable income for the year it was earned, regardless of when the account closes.