Key Takeaways
- Interest of $10 or more in a calendar year must be reported on your federal tax return, regardless of whether the bank sends you a 1099-INT.
- Banks issue Form 1099-INT only when interest reaches $10; below that threshold, you still owe tax on the interest but the bank does not report it.
- You report checking account interest on Schedule 1 (Form 1040) under "Interest" — it is ordinary income taxed at your regular rate.
- The IRS receives a copy of every 1099-INT issued, so unreported interest on accounts the bank tracks will trigger a notice.
When the Bank Issues a 1099-INT
Your bank mails a Form 1099-INT to you and files a copy with the IRS if you earned $10 or more in interest during the calendar year. This threshold applies to each account separately — if you have two checking accounts at different banks and earn $6 at one and $5 at the other, neither bank sends a 1099-INT, but you still owe tax on the $11 total.
The 1099-INT arrives by January 31 of the following year. It shows the account number, the bank's name and tax ID, and the total interest paid. If you earned interest at multiple banks, you receive a separate 1099-INT from each one. Keep these forms with your tax records; you will need the figures when you file.
Interest Below $10 Still Counts as Income
If you earned less than $10 in interest, the bank does not issue a 1099-INT, but that interest is still taxable income. You are responsible for reporting it on your return. This matters most if you have multiple accounts or moved money between banks mid-year and earned small amounts at each.
The IRS does not receive a report of this interest from the bank, so there is no automatic cross-check. However, you are still legally required to report it. If you keep records of your account statements, you can add up the interest yourself and include it on your return even without a 1099-INT.
How to Report Interest on Your Tax Return
You report checking account interest on Schedule 1 (Form 1040), which is the supplemental income schedule. On Schedule 1, there is a line for "Interest" — this is where you enter the total interest from all your accounts, whether or not you received a 1099-INT for each one.
If you received 1099-INTs, add up all the amounts shown in box 1 of each form and enter the total. If you earned interest below the $10 threshold, add that to your total as well. The interest is taxed as ordinary income at your regular tax rate — there is no special rate or deduction for it.
If you file electronically, the software will prompt you to enter the 1099-INT information. If you file by paper, attach Copy B of each 1099-INT to your return. Keep Copy C for your records.
What Happens If You Do Not Report It
The IRS receives a copy of every 1099-INT filed by banks. Their systems match the 1099-INT to your Social Security number and compare it to what you reported on your return. If you reported less interest than the 1099-INT shows, or nothing at all, the IRS will send you a notice asking for the difference plus tax owed.
This mismatch is one of the easiest things for the IRS to catch because the data is automated and the amounts are small enough that the IRS processes these notices in bulk. You may also owe interest and penalties on the unpaid tax, depending on how long the discrepancy went unresolved.
Interest From High-Yield Savings and Money Market Accounts
The same rules explore to interest from high-yield savings accounts, money market accounts, and certificates of deposit. Any account that earns interest — whether it is at a traditional bank, an online bank, or a credit union — generates a 1099-INT if the interest reaches $10. You report all of it the same way on Schedule 1.
High-yield accounts often earn enough interest to trigger a 1099-INT, especially if you hold a large balance. A $50,000 balance in an account earning 4% APY generates about $2,000 in annual interest, which will definitely result in a 1099-INT. Even smaller balances can cross the $10 threshold over a year.
Correcting a Mistake on a 1099-INT
If the 1099-INT shows an incorrect amount — wrong account number, duplicate reporting, or a calculation error — contact the bank first. Ask them to issue a corrected 1099-INT (marked as a correction) and file it with the IRS. The bank will also send you a corrected copy.
Once you receive the corrected 1099-INT, report the correct amount on your tax return. If you already filed and the bank later corrects the form, you may need to file an amended return (Form 1040-X) to match. The bank's correction will reach the IRS, and you want your return to match what they have on file.
Frequently Asked Questions
Do I report interest if I closed the account before the end of the year?
Yes. The 1099-INT reports interest earned during the calendar year, regardless of when you closed the account. If you earned $10 or more in interest before closing it, the bank still issues a 1099-INT and you still report it on your return for that year.
What if I earned interest at a bank that went out of business?
The FDIC or the acquiring bank will issue the 1099-INT on behalf of the failed bank. You report it the same way. If you do not receive a 1099-INT and cannot locate one, contact the FDIC or the bank that took over the accounts — they can provide a copy or tell you the interest amount.
Is checking account interest taxed differently than other income?
No. Interest is ordinary income and is taxed at your regular tax rate. It does not may have access to for any special rate or preferential treatment. It is added to your other income and taxed together.
Do I need to report interest if I am not filing a tax return?
If you are required to file a return based on your total income, yes — you must include the interest. If you are not required to file, you technically do not have to, but the IRS may still contact you if they receive a 1099-INT in your name. It is safer to file and report the interest than to ignore it.
Can I deduct any expenses related to the checking account?
No. Checking account fees, maintenance charges, and overdraft fees are not deductible. Interest earned is income; costs of maintaining the account are personal expenses. The only exception is if the account is used for business, in which case business-related fees may be deductible as a business expense.