Yes, sign-up bonuses are taxable income, and the bank will report them on a 1099-INT
When a bank gives you $200 for opening a checking account, that money counts as taxable income to the IRS. The bank treats it the same way it treats interest you earn — as compensation for your business. You will receive a 1099-INT form (Interest Income) from the bank if the bonus is $10 or more, and you must report it on your tax return.
This surprises most people because the bonus feels like a gift or a promotional offer. It is not, from a tax perspective. The IRS sees it as payment for opening an account and meeting the bank's conditions. If you do not report it and the IRS matches the 1099-INT to your return, you will owe tax on the amount plus potential penalties.
The timing of when you receive the bonus does not change whether it is taxable. Whether the bank deposits it when ready or after you maintain a minimum balance for 90 days, it is income in the year you receive it.
Key Takeaways
- Bank sign-up bonuses of $10 or more are reported on Form 1099-INT and must be included as income on your tax return.
- The bonus is taxable in the year you receive it, regardless of when you opened the account or what conditions you had to meet.
- You will owe federal income tax on the bonus amount at your ordinary income tax rate, plus any applicable state and local taxes.
- If you receive multiple bonuses from different banks in the same year, each one appears on a separate 1099-INT or is combined on one form from the same bank.
- Bonuses under $10 are not reported on a 1099-INT, but they are still technically taxable income that you should report.
How the 1099-INT form reports your bonus
The bank issues a 1099-INT to you and files a copy with the IRS. Box 1 of the form lists "Interest Income," and your sign-up bonus appears there alongside any actual interest you earned in that account. The form does not separate the bonus from interest — it is all lumped together as Box 1 income.
You receive the 1099-INT by January 31 of the year following the one in which you got the bonus. If you opened an account and received a $300 bonus in November 2024, you will get the 1099-INT in January 2025, and you report that $300 on your 2024 tax return.
If a bank combines multiple accounts or bonuses, they may list them all on one 1099-INT with a single total in Box 1. If you have accounts at different banks, each bank sends its own 1099-INT. You add all the amounts from all your 1099-INTs together when you file.
What tax rate applies to the bonus
The bonus is taxed as ordinary income at your marginal tax rate — the same rate that applies to your salary or wages. If you are in the 22% federal tax bracket, you owe roughly 22% of the bonus amount in federal tax. If you are in the 12% bracket, you owe roughly 12%.
You also owe state and local income tax on the bonus if your state or city has an income tax. The rate varies by location. A $200 bonus might cost you $44 in federal tax (at 22%) plus $10 to $20 in state tax, depending on where you live.
The bonus does not affect your tax bracket or push you into a higher one by itself — it straightforward adds to your total income for the year. If you earned $50,000 in wages and received a $500 bonus, your taxable income is $50,500.
Bonuses under $10 and reporting requirements
Banks are not required to issue a 1099-INT for bonuses under $10. However, that does not mean the income is not taxable. Technically, you should report it on your return even if you do not receive a form. In practice, the IRS rarely pursues people for unreported bonuses under $10, but the requirement exists.
If you receive a $5 bonus and do not get a 1099-INT, you have two options: report it anyway on Schedule 1 (Other Income) of your tax return, or do not report it and accept the small risk. Most people do not report bonuses this small, and most tax software does not prompt you to enter them.
The safest approach is to report any bonus you receive, regardless of size. It takes one line on your return and eliminates any question.
Multiple bonuses in the same year
If you opened three different bank accounts and received bonuses from each one in 2024, you will receive up to three separate 1099-INT forms (one from each bank) or one combined form if the same bank issued multiple bonuses. You add all the amounts together and report the total as interest income on your return.
There is no limit to how many bonuses you can receive and report. Some people deliberately open multiple accounts to collect bonuses — a practice sometimes called "bonus hunting." Each bonus is still taxable income. If you collected $1,500 in bonuses across five accounts, you report all $1,500.
The bank does not care how many other bonuses you received elsewhere. Each bank only knows about its own bonus and reports that amount on its 1099-INT.
How to report the bonus on your tax return
When you file your return, the 1099-INT amount goes on Schedule B (Interest and Ordinary Dividends) if you have other interest income to report, or directly on Form 1040 if it is your only interest income. Most tax software automatically pulls the 1099-INT information and places it in the correct location once you enter the form details.
You enter the bank's name, the amount from Box 1 of the 1099-INT, and the bank's tax ID number (also on the form). The software then adds this to your other income and calculates your tax liability.
If the 1099-INT amount seems wrong — for example, if the bank reported $500 but you only received $200 — contact the bank when ready and ask for a corrected form (a 1099-INT with "CORRECTED" printed on it). Do not file your return until you have the correct amount, because the IRS will match your return to the original 1099-INT and flag a discrepancy.
State and local tax treatment
Most states that have an income tax treat bank bonuses the same way the IRS does: as taxable income. A few states have no income tax (Texas, Florida, Tennessee, and others), so residents of those states owe no state tax on the bonus, only federal.
Some cities impose local income taxes on top of state tax. New York City, for example, taxes residents on all income, including bank bonuses. If you live in a city with a local income tax, the bonus is subject to that tax as well.
Your tax software or tax preparer will account for your state and local taxes automatically based on your address. You do not need to do anything special — just report the bonus amount, and the software calculates what you owe.
Frequently Asked Questions
If I close the account before the bonus vests, do I still owe tax on it?
If the bank claws back the bonus because you did not meet the conditions, you may be able to claim a loss or adjustment on your return. However, this is complicated and depends on the specific terms. Contact a tax professional if this happens to you. Most people do meet the conditions and keep the bonus.
Can I deduct the bonus as a business expense if I opened the account for my business?
No. The bonus is income to you, not a deductible business expense. If you opened a business checking account and received a bonus, that bonus is still taxable income. You cannot offset it against business expenses.
What if the bank never sends me a 1099-INT?
Contact the bank and ask for it. If the bonus was $10 or more, the bank is required to send one by January 31. If the bank refuses or cannot locate the bonus in its records, you can still report the income on your return based on your own records (your bank statement or email confirmation of the bonus).
Do I owe self-employment tax on the bonus?
No. Self-employment tax applies only to income from self-employment or business activity. A bank bonus is passive income and is not subject to self-employment tax, even if you are self-employed.
What if I received the bonus in one year but the 1099-INT arrived in the next year?
Report the bonus in the year you received it, not the year you received the 1099-INT. If you got the bonus in December 2024 and the form arrived in January 2025, it goes on your 2024 return. The form is dated 2024 to reflect this.