You report savings account interest on your tax return, not by sending money directly to the IRS

The interest your bank pays you on a savings account is taxable income. You do not send the IRS a separate payment for it. Instead, you report the total interest you earned during the year on your federal tax return (Form 1040), and the tax you owe on that interest gets calculated as part of your overall tax bill. Your bank sends you a Form 1099-INT in January or early February showing how much interest you earned, and you use that form to fill in the interest income line on your return.

Whether you actually owe federal tax on the interest depends on your total income and filing status. If your income is below the standard deduction for your situation, you may not owe federal tax even though you still need to report the interest. State income tax rules vary — some states tax interest income and some do not.

Key Takeaways

  • Your bank reports savings interest to the IRS on Form 1099-INT, which you receive by early February each year.
  • You report this interest on line 1b of Form 1040 (federal return) or the equivalent line on your state return if your state taxes interest income.
  • You do not send money to the IRS for interest tax separately — the tax is calculated when you file your return.
  • If you earned less than $10 in interest, your bank may not send a Form 1099-INT, but you still report the interest if you file a return.
  • High-yield savings accounts and money market accounts report interest the same way as regular savings accounts.

How your bank reports interest income to the IRS

Banks are required to report interest payments to both you and the IRS using Form 1099-INT. You should receive this form by February 1 of the year following the tax year. For example, interest you earned in 2024 will be reported on a Form 1099-INT you receive in early 2025. The form shows the account number, the bank's name and tax ID, and the total interest paid to you during the calendar year.

If you have multiple savings accounts at different banks, you will receive a separate Form 1099-INT from each bank. If you have multiple accounts at the same bank, that bank may combine them into one form or issue separate forms depending on how the accounts are registered. The IRS receives a copy of every Form 1099-INT issued to you, so they know how much interest income you reported.

Banks are not required to issue a Form 1099-INT if the interest paid was less than $10 for the year. However, you still owe tax on that interest if you file a return, and you should report it even without the form.

Where to report interest income on your tax return

On your federal return, you report savings account interest on Form 1040, line 1b (labeled "Interest"). This is where all taxable interest income goes — savings accounts, money market accounts, certificates of deposit, bonds, and any other interest-bearing accounts. You add up the interest from all your Form 1099-INT forms and enter the total on line 1b.

If you are filing a state return and your state taxes interest income, you will report the same interest amount on your state return as well. The location of this line varies by state — some states use a form similar to the federal return, and others use a different format. Your state's tax department website will show you where to report interest income on your state form.

If your total interest income is $1,500 or less and you have no other investment income, you can file Form 1040-SR (if you are 65 or older) or the standard Form 1040. If your interest income is higher or you have other investment income, you may need to file Schedule B (Interest and Ordinary Dividends) along with your Form 1040, depending on your total income and filing status.

When you owe federal tax on savings interest

Whether you owe federal income tax on savings interest depends on your total income and your filing status. The standard deduction is the amount of income you can earn without owing federal tax. For 2024, the standard deduction ranges from $14,600 (single filers under 65) to $29,200 (married filing jointly, both under 65). If your total income, including the interest, is below your standard deduction, you do not owe federal tax.

However, you may still be required to file a return even if you do not owe tax. If you had income tax withheld from paychecks or made estimated tax payments, filing allows you to get a refund. Additionally, if you are self-employed or have other special circumstances, you may need to file regardless of whether you owe tax.

If your income is above the standard deduction, you will owe federal tax on the interest at your ordinary income tax rate. Interest income is taxed as ordinary income, not at capital gains rates. The tax rate depends on your total income and filing status — the more income you have, the higher your tax bracket.

State income tax on savings interest

State tax treatment of interest income varies significantly. Some states, such as Illinois and Mississippi, do not tax interest income at all. Other states tax interest the same way the federal government does — as ordinary income at your state tax rate. A few states have special rules, such as taxing interest only above a certain threshold or offering an exemption for interest from certain types of accounts.

To find out whether your state taxes savings interest, check your state's tax department website or contact them directly. If your state does tax interest, you will report it on your state return using the same Form 1099-INT information you used for your federal return. If your state does not tax interest, you do not report it on your state return, even though you report it federally.

If you live in one state but earn interest from an account in another state, you report the interest to the state where you live, not the state where the bank is located. The bank's location does not matter for tax purposes.

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

If you earned interest but did not receive a Form 1099-INT by early February, contact your bank and ask for a copy. Banks sometimes delay sending forms or send them to an outdated address. You can request a duplicate form by phone, email, or through your online banking portal. Keep a record of when you requested it in case the IRS asks questions later.

If your bank confirms that interest was paid but says they are not issuing a Form 1099-INT because the amount was under $10, you still need to report that interest on your tax return. Use your bank statement or the interest shown in your online account to determine the amount. Write "Received from [bank name]" on your return if you do not have an official form.

If you believe your bank reported interest incorrectly on the Form 1099-INT — for example, if the amount does not match your bank statements — contact the bank first to clarify. If the bank made an error, they will issue a corrected Form 1099-INT (marked as a correction). If you reported the wrong amount on your return, you can file an amended return using Form 1040-X.

Interest from high-yield savings and money market accounts

High-yield savings accounts and money market accounts report interest the same way as regular savings accounts — on Form 1099-INT. The only difference is that these accounts typically pay higher interest rates, so you may owe more tax on the earnings. The reporting and tax treatment are identical to a traditional savings account.

If you move money between a regular savings account and a high-yield account during the year, each bank reports only the interest paid by that bank. You will receive separate Form 1099-INT forms from each institution if you have accounts at multiple banks. Add up all the interest from all your forms when you report on your tax return.

Some people use high-yield savings accounts specifically for tax-advantaged saving, but the interest is still taxable. If you want to reduce taxes on savings, consider using a tax-advantaged account such as a traditional IRA or 529 plan, where interest may grow tax-deferred or tax-free depending on the account type and how you use it.

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 filing status. If your total interest income is below your standard deduction, you are not required to file a federal return. However, if you had taxes withheld from other income or made estimated payments, filing allows you to get a refund. Check the IRS website or your state tax department to confirm the filing requirement for your situation.

What if I earned interest in a joint savings account?

The bank reports the total interest on Form 1099-INT to whichever person's Social Security number is listed first on the account. That person is responsible for reporting all the interest on their tax return, even if both account holders contributed equally. The account holders may need to split the income on their individual returns if they file separately — check with a tax professional about how to handle this in your situation.

Can I deduct any expenses related to my savings account?

No. Interest income is reported as-is, and you cannot deduct bank fees, account maintenance charges, or other costs related to the account. These are personal expenses and are not deductible on your federal tax return.

What happens if I move money between banks during the year?

Each bank reports only the interest paid by that bank during the time you held an account there. If you opened a high-yield account in June and earned $50 there, and kept a regular savings account all year earning $10, you will receive two Form 1099-INT forms — one for $50 and one for $10. You report both amounts on your tax return.

Do I need to report interest if I am not filing a tax return?

If you are not required to file a return based on your income, you do not need to report the interest. However, if you are filing a return for any reason — to get a refund, because you are self-employed, or because you have other income — you must report all interest income, even if it is below $10.