Yes, you must report all savings account interest on your tax return, with one narrow exception

The IRS requires you to report every dollar of interest your savings account earns, no matter how small. The only exception is if your total interest income from all sources falls below $10 for the year — in that case, you do not have to report it, though you may still choose to. Your bank will send you a Form 1099-INT in January showing the interest you earned during the previous year. You use that form to fill in your tax return.

The $10 threshold applies to your combined interest from all accounts and sources — savings accounts, money market accounts, CDs, bonds, and any other interest-bearing investments. If you have $6 in interest from one bank and $5 from another, you are below the threshold and do not have to report it. If you have $6 and $6, you cross the line and must report both.

Key Takeaways

  • You must report all interest income on your tax return unless your total interest from all sources is less than $10 for the year.
  • Your bank sends you Form 1099-INT by January 31 showing the interest you earned; use this to complete your tax return.
  • Interest is taxed as ordinary income at your regular tax rate, not at a special capital gains rate.
  • If you do not receive a 1099-INT but earned interest, you still have to report it based on your own records.

How the IRS knows about your interest

Banks are required to report interest payments to the IRS on Form 1099-INT. Your bank sends you a copy and files a copy with the IRS under your Social Security number. The IRS then cross-checks what you report on your tax return against what the bank reported. If you earned $200 in interest and do not report it, the IRS will likely catch the discrepancy and send you a notice.

This matching system is automated and covers nearly all savings accounts at major banks. Online banks, credit unions, and smaller institutions all follow the same reporting rule. The only accounts that sometimes slip through are very old accounts at institutions that have closed or merged, but even those are usually caught eventually.

What happens if you miss reporting interest

If you do not report interest that the IRS knows about, you will receive a notice of underreported income. The IRS will calculate the tax you owe on that interest, add penalties (usually 20 percent of the unpaid tax), and often add interest on top of that. The total can be significantly more than the tax on the interest itself.

If the amount is small — say, $50 in unreported interest — the IRS may not pursue it aggressively, but there is no may provide. It is safer and simpler to report it. If you discover you missed reporting interest in a prior year, you can file an amended return (Form 1040-X) for that year and pay what you owe. Filing the amendment yourself is better than waiting for the IRS to contact you.

How interest is taxed

Interest income is taxed as ordinary income, meaning it is added to your wages, self-employment income, and other earnings and taxed at your regular tax rate. If you are in the 22 percent tax bracket, interest is taxed at 22 percent. If you are in the 12 percent bracket, it is taxed at 12 percent. Interest does not get the lower tax rate that long-term capital gains receive.

This matters most if you have a large amount of interest. A high-yield savings account earning 4 or 5 percent can generate significant interest if you have $50,000 or more saved. That interest will be taxed at your full rate, which is why some people move money between accounts or into tax-advantaged vehicles like Roth IRAs or I Bonds when they have large balances.

When you do not receive a 1099-INT

If you earned interest but your bank did not send you a 1099-INT, you still have to report it. Banks are required to send a 1099-INT only if interest is $10 or more, so if you earned $8 in interest, you will not receive a form. But if you earned $12 and did not receive a form by February 1, contact your bank and ask for it. They may have sent it to an old address or made an error.

If your bank truly did not report the interest to the IRS, you should still report it on your return. Use your own records — your account statements, year-end summaries, or the bank's online portal — to find the exact amount. Report it on Schedule 1 (Form 1040) under "Interest" even without a 1099-INT. Reporting it yourself protects you if the IRS later discovers the unreported income.

Interest from joint accounts and accounts held by minors

If you have a joint savings account, the bank reports the full interest amount on a 1099-INT to whoever is listed first on the account, or sometimes splits it between both owners. You and the other owner need to figure out who actually owns what portion of the interest and report only your share. If you own 60 percent of the account, you report 60 percent of the interest. Keep documentation of this split in case the IRS asks.

If a parent holds a savings account for a minor child, the interest is still taxable to the child, not the parent. The bank will issue the 1099-INT in the child's name and Social Security number. The parent must report this interest on the child's tax return (if one is required) or on the parent's return under the "kiddie tax" rules if the child's income is below the filing threshold. The rules here are complex and depend on the child's age and total income.

Frequently Asked Questions

Do I have to report interest if I only earned $5?

No. If your total interest from all sources is under $10 for the year, you do not have to report it. However, if you earned $5 from one account and $6 from another, you must report both because your combined interest is $11.

What if my bank made a mistake on the 1099-INT?

Contact your bank immediately and ask them to issue a corrected 1099-INT (Form 1099-INT with a "Corrected" box checked). The bank will send the corrected form to you and the IRS. If you have already filed your return, you may need to file an amended return once you receive the corrected form.

Can I deduct the taxes I pay on interest?

No. Interest income is added to your taxable income, and you pay tax on it at your regular rate. You cannot deduct the tax itself. However, if you paid investment fees to earn that interest, some of those fees may be deductible under certain circumstances — consult a tax professional about your specific situation.

Is interest from a money market account reported the same way as savings account interest?

Yes. Money market accounts, CDs, and other interest-bearing accounts all use Form 1099-INT. The reporting and tax treatment are identical to savings account interest.

What if I moved banks during the year?

You should receive a 1099-INT from each bank where you held an account that earned $10 or more in interest. Add up the interest from all the forms and report the total on your tax return. If one bank closed your account mid-year, they still report the interest you earned while the account was open.