Yes, you report checking account bonuses as income on your federal tax return
A checking account bonus — sometimes called a sign-up bonus or opening bonus — counts as taxable income the year you receive it. The bank or credit union will send you a Form 1099-INT (for interest income) or Form 1099-MISC (for miscellaneous income) showing the bonus amount. You then report this on your tax return, just as you would report interest earned on a savings account.
The IRS treats bonuses this way because you received money without spending your own funds to earn it — it is income to you, even though you did nothing except meet the bank's conditions. The amount is usually small (often $50 to $300), which means the tax on it is small, but you still owe it.
If the bonus is under $600, the bank may not send you a form at all, but you still report it. If you receive multiple bonuses in one year from different banks, each one gets reported separately, and they add up on your return.
Key Takeaways
- Checking account bonuses are taxable income and must be reported on your federal tax return in the year you receive the money.
- Banks send Form 1099-INT or Form 1099-MISC for bonuses, but you report the bonus even if you do not receive a form.
- The bonus is added to your total income for the year, which may affect your tax bracket or the amount you owe.
- State income tax rules vary — some states tax bonuses and some do not, so check your state's rules if you live in a state with income tax.
How the bank reports the bonus to the IRS
Banks are required to report bonuses of $10 or more to the IRS using either Form 1099-INT or Form 1099-MISC, depending on how the bank categorizes the payment. You will receive a copy of this form by January 31 of the year after you get the bonus. The form shows your name, Social Security number, the bank's name, and the bonus amount.
The bank sends a copy to the IRS at the same time, so the IRS knows about the bonus. This is why reporting it yourself is important — the IRS matches what you report on your return against what the bank reported. If the numbers do not match, you may receive a notice asking you to explain the difference.
If your bonus is under $10, the bank does not have to send a form, but the bonus is still income. You report it on your return anyway, even without a form in hand.
Where you report the bonus on your tax return
On the federal Form 1040 (the main individual tax return), bonuses reported on Form 1099-INT go on the line for interest income. Bonuses reported on Form 1099-MISC go on the line for miscellaneous income. Both are added to your total income for the year.
If you use tax software (like TurboTax, H&R Block, or TaxAct), you enter the 1099 information when the software prompts you, and it automatically places the amount on the correct line. If you file by hand or with a tax preparer, they will know where to put it.
The bonus does not get a deduction to offset it — you cannot subtract it from your income. It straightforward adds to what you owe tax on.
How the bonus affects your tax bill
A checking account bonus increases your total income for the year, which can push you into a higher tax bracket or reduce tax credits you might otherwise receive. For example, if you are close to the income limit for the Earned Income Tax Credit (EITC), a $200 bonus might disqualify you from part of that credit.
The actual tax you owe on the bonus depends on your total income and tax bracket. If you are in the 22% tax bracket, a $100 bonus costs you about $22 in federal tax. If you are in the 12% bracket, it costs about $12. The exact amount varies based on your situation.
For most people, the tax on a small bonus is modest — often $10 to $50 — but it is worth knowing before you accept the bonus, especially if you are close to an income threshold that affects your benefits or credits.
State income tax on bonuses
State rules vary widely. Some states tax bonuses the same way the federal government does — as income. Other states do not tax interest or bonus income at all. A few states have special rules for bank bonuses specifically.
If you live in a state with income tax, check your state's tax agency website or ask a tax preparer whether bonuses are taxable in your state. States that do not have income tax (like Texas, Florida, and Nevada) do not tax bonuses. If you live in a state that taxes income, you will likely report the bonus on your state return as well as your federal return.
What to do if you do not receive a Form 1099
If your bonus was under $10, or if the bank made an error and did not send a form, you still report the bonus on your return. Write down the bank's name, the bonus amount, and the date you received it. When you file, enter the bonus on the appropriate line even though you do not have a form to attach.
Keep your own records — a screenshot of your account showing the bonus, an email from the bank, or a bank statement showing the deposit. If the IRS ever questions the bonus, you can show proof that you received it and reported it honestly.
If you received a form but it shows the wrong amount, contact the bank and ask them to send a corrected form. You can then file an amended return if needed, though for small errors this is often not necessary.
Multiple bonuses in the same year
If you opened several checking accounts and received multiple bonuses in one year, each bonus is reported separately and they all add together on your tax return. A $150 bonus from one bank plus a $200 bonus from another equals $350 in taxable income for the year.
Each bank sends its own 1099 form, and you enter each one on your return. The total of all bonuses is what affects your tax bracket and your final tax bill. This is one reason to think about timing — if you are close to a tax bracket boundary or an income limit for a credit, spacing bonuses across two calendar years might reduce your tax impact.
Frequently Asked Questions
Can I deduct the cost of opening the account to get the bonus?
No. The IRS does not allow a deduction for ordinary banking fees or the cost of meeting account requirements. The bonus is income, and there is no offsetting deduction, even if you had to maintain a minimum balance or set up direct deposit to earn it.
What if I close the account before the bonus posts?
If the bonus never posts to your account, you do not report it as income. But if the bonus was deposited and then you closed the account, you still report it — closing the account does not erase the income. Keep records showing when the bonus was deposited.
Do I report the bonus if I am not required to file a tax return?
If your total income (including the bonus) is below the filing threshold for your age and filing status, you may not be required to file. However, if you have taxes withheld from a job, you should file to get a refund. Check the IRS website or ask a tax preparer whether you must file in your situation.
Will the bonus affect my student loans or financial aid?
Possibly. If you are explore for federal student aid, the FAFSA (Free process for Federal Student Aid) asks about your income. A bonus that increases your reported income could affect your aid package. Check with your school's financial aid office if you are concerned.
What if the bank sends me a 1099 with the wrong amount?
Contact the bank when ready and ask them to issue a corrected form. They will send you a corrected 1099 and file a corrected version with the IRS. Use the corrected form when you file your return. If you already filed with the wrong amount, you can file an amended return (Form 1040-X).