Yes, you must report checking account interest as income to the IRS

Any interest your checking account earns is taxable income. The bank will send you a Form 1099-INT in January if the interest totals $10 or more during the calendar year. You report this amount on your federal tax return, typically on Schedule 1 (Form 1040) or directly on Form 1040 depending on your filing method. Even if you don't receive a 1099-INT because the interest was under $10, you still owe tax on it—you just have to report it yourself.

The IRS knows about your interest because banks report it automatically. If you don't report it and the IRS matches their records to your return, you'll face penalties and back taxes. The amount is usually small, but the reporting requirement is firm.

Key Takeaways

  • Banks report checking account interest of $10 or more on Form 1099-INT, which you receive by January 31.
  • You must report all checking account interest on your tax return, even amounts under $10 that don't generate a 1099-INT.
  • Interest is reported as ordinary income on Schedule 1 (Form 1040) or directly on your main return form, depending on your tax software or preparer.
  • The IRS receives a copy of every 1099-INT your bank files, so unreported interest creates a mismatch the agency will catch.

When you'll receive Form 1099-INT and what it shows

Your bank mails or makes available Form 1099-INT by January 31 each year if you earned $10 or more in interest during the previous calendar year. The form shows the total interest paid to you in Box 1. Some banks also report interest withheld for backup withholding in Box 4, though this is rare unless you failed to provide a valid tax ID or Social Security number.

You'll receive one 1099-INT per bank account that earned interest. If you have multiple checking accounts at the same bank, they may combine the interest on a single form or issue separate forms—this varies by bank. Keep the copy the bank sends you (Copy B) with your tax records for at least three years.

How to report the interest on your tax return

If you file Form 1040 (the standard federal income tax return), you report checking account interest on Schedule 1, Part I, Line 8 (labeled "Interest"). Add up the interest from all your 1099-INT forms and enter the total. If you use tax software, it will usually prompt you to enter 1099-INT information and place it in the correct location automatically.

The interest then flows to your total income on Form 1040, Line 8. This increases your adjusted gross income (AGI), which can affect other parts of your return—for example, whether you may have access to for certain deductions or credits that phase out at higher income levels. If your interest is very small (under $10), you can still report it on Schedule 1 even without a 1099-INT; just write the amount in.

What happens if your interest is under $10

Banks are not required to issue a 1099-INT for interest under $10, but you still owe tax on it. You must report it yourself on your return. This is most common with savings accounts or money market accounts that earn more interest than checking accounts, but some high-yield checking accounts can generate reportable interest even on modest balances.

The IRS does not receive a report of interest under $10, so there is no automatic cross-check. However, if the bank later corrects its records or if you're audited, the interest will surface. It's simpler and safer to report it than to skip it.

Interest from joint accounts and accounts held in trust

If you own a checking account jointly with another person, the bank reports the full interest amount on a 1099-INT to the primary account holder (usually the first person listed on the account). You and the joint owner must then split the interest based on your actual ownership share and report your portion on your own tax return. This split is not automatic—you have to do it yourself and keep records of the agreement.

If the account is held in trust, the trustee receives the 1099-INT and must report the interest on the trust's tax return (Form 1041), not on individual returns. If you are the beneficiary but not the trustee, you do not report the interest directly. Custodial accounts for minors work similarly: the custodian reports the interest, though some of it may be taxable to the child depending on the child's own income and the "kiddie tax" rules.

State and local taxes on checking account interest

Most states that have an income tax also tax interest income. You report checking account interest on your state return the same way you do on your federal return—usually on a state version of Schedule 1 or a dedicated interest income line. A few states exempt interest income entirely, and some exempt interest from certain types of accounts (like accounts held by seniors or disabled persons), but these are exceptions.

Check your state's tax agency website or ask your tax preparer whether your state taxes interest. If you live in a state with no income tax (such as Florida, Texas, or Wyoming), you do not owe state tax on the interest, though you still owe federal tax.

Frequently Asked Questions

What if I don't receive a 1099-INT but the bank paid me interest?

The bank may not have issued one because the interest was under $10, or there was a processing delay. Contact the bank and ask for a corrected form if you believe you should have received one. Either way, report the interest on your return based on your account statements.

Can I deduct the taxes I pay on checking account interest?

No. Interest income is ordinary income, and you cannot deduct the federal income tax you owe on it. You can deduct state and local income taxes (SALT) up to $10,000 per year on Schedule A if you itemize deductions, but this is a deduction of the tax itself, not of the interest.

Do I report interest from a joint account as half on my return?

Only if you and the joint owner actually own it equally and have agreed to split the interest. The bank reports the full amount to one person, so you must adjust it on your return to reflect your true ownership share. Keep written documentation of the split in case the IRS asks.

What if I earned interest but the bank closed my account before issuing a 1099-INT?

The bank will still issue a 1099-INT for interest earned while the account was open, even if it's closed now. You'll receive it by January 31 of the following year. If the account closed in December and you don't receive a form by late February, contact the bank's tax department.