You owe federal income tax on any interest your checking account earns

Interest paid into your checking account counts as income to the IRS, just like wages or a side job. If your bank pays you interest, you report it on your tax return. The amount is usually small — most checking accounts earn less than $1 per year — but the rule applies no matter how little it is.

Your bank will send you a form called a 1099-INT if you earned $10 or more in interest during the year. You use this form to report the interest on your federal tax return. If you earned less than $10, your bank may not send the form, but you still owe tax on the interest if you file a return.

Some states also tax interest income, though the rules vary by where you live. A few states do not tax interest at all, while others tax it the same way the federal government does.

Key Takeaways

  • Interest earned in a checking account is taxable income to the IRS, regardless of the amount.
  • Your bank sends you a 1099-INT form if you earn $10 or more in interest during the calendar year.
  • You report checking account interest on your federal tax return, usually on Schedule 1 or Schedule B depending on your total interest income.
  • State tax rules on interest vary — some states do not tax it, while others do, so check your state's rules.
  • Most checking accounts earn so little interest that the tax owed is negligible, but the reporting requirement still applies.

When your bank sends you the 1099-INT form

The 1099-INT is an IRS form your bank mails or emails to you by January 31 of the following year. It shows how much interest you earned in the previous calendar year. For example, interest you earn in 2024 appears on a 1099-INT sent in January 2025.

Banks are required to send this form only if you earned $10 or more in interest during the year. However, the IRS still expects you to report interest under $10 if you file a tax return. If you earned $5 in interest and do not receive a 1099-INT, you still need to report that $5.

You will receive the 1099-INT even if you closed the account during the year, as long as you earned the interest while the account was open. Keep this form with your tax records — you will need it when you file your return.

How to report interest on your tax return

Where you report the interest depends on how much you earned. If your total interest income from all sources (checking, savings, money market accounts, bonds, and so on) is $1,500 or less, you report it on Schedule 1, line 2a of Form 1040. You do not need to itemize or attach a separate schedule.

If your total interest income is more than $1,500, you must use Schedule B instead, which requires you to list each source of interest separately. Most people with checking accounts will use Schedule 1 because the interest is so small.

You add the interest amount to your other income, and it is taxed at your regular income tax rate. If you use tax software, it usually walks you through where to enter the amount from your 1099-INT. If you file by hand or with a tax preparer, bring the 1099-INT with you.

Why checking account interest is usually negligible

Most traditional checking accounts pay little to no interest. Banks that do pay interest typically offer rates between 0.01% and 0.05% per year, meaning a $1,000 balance might earn $0.10 to $0.50 annually. At those amounts, the tax owed is a few cents.

Some online banks and credit unions offer higher rates on checking accounts — occasionally 4% or more — but these are less common and usually require conditions like a minimum balance or monthly direct deposits. If you have one of these accounts, your interest earnings will be larger and the tax owed will be more noticeable.

Even if the tax is small, the reporting requirement still applies. The IRS tracks 1099-INT forms, so if your bank reports interest and you do not report it on your return, the IRS may notice the discrepancy.

State taxes on checking account interest

Nine states do not tax interest income at all: Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, Texas, and Wyoming. If you live in one of these states, you owe no state tax on your checking account interest.

Most other states tax interest as ordinary income at your regular state tax rate. A few states have special rates for interest income, but these are rare. Check your state's tax authority website or ask a tax preparer if you are unsure whether your state taxes interest.

If you live in a state that taxes interest, you report it on your state tax return using the same amount from your 1099-INT. Some states require you to attach a copy of the 1099-INT to your return.

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

If you earned $10 or more in interest but did not receive a 1099-INT by early February, contact your bank. Ask them to send it or provide the interest amount in writing. Banks sometimes delay sending forms or send them to an old address.

If you earned less than $10 and your bank did not send a form, you still need to report the interest if you file a tax return. Check your account statements to find the exact amount, or contact your bank and ask them to tell you the total interest earned during the year.

Keep records of all interest earned, whether or not you receive a 1099-INT. If the IRS ever questions your return, you will need to show proof of the amount you reported.

Frequently Asked Questions

Do I have to file a tax return if I only earned a few dollars in checking account interest?

That depends on your total income and filing status. Interest alone does not require you to file, but if you have other income (wages, self-employment, and so on), you may be required to file regardless of the interest. Use the IRS filing requirements tool on irs.gov to determine whether you must file.

What if I earned interest in two different checking accounts?

Add the interest from both accounts together. If the total is $10 or more, each bank that paid you $10 or more will send a separate 1099-INT. Report all of them on your tax return. If one bank paid you $8 and another paid you $7, neither will send a form, but you still owe tax on the combined $15.

Can I deduct anything to offset the tax on checking account interest?

No. Interest income is added to your taxable income, and you cannot deduct expenses to reduce it. However, if you have investment losses or other deductions, those may lower your overall tax bill. Talk to a tax preparer if you want to understand how interest fits into your full tax picture.

Does interest earned in a joint checking account get split between account holders?

Your bank reports the total interest to the IRS, but you and the other account holder decide how to split it for tax purposes. You can divide it equally, or one person can claim all of it — whatever you agree on. Make sure both of you report your share on your respective tax returns so the total matches what the bank reported.

What if I moved and my 1099-INT went to my old address?

Contact your bank and provide your current address. Ask them to send a corrected 1099-INT or confirm the interest amount by phone or email. You can also file your return using the amount from your account statements if you cannot get the form in time — just keep records showing where the number came from.