You must report interest earned on savings accounts if the total exceeds $10 in a calendar year, and the bank will send you a form documenting it
The IRS requires you to report interest income on your tax return once it reaches $10 or more in a single calendar year. Your bank tracks this and sends you a Form 1099-INT by January 31 of the following year, listing all interest paid to that account during the previous year. You use this form when filing your taxes.
The $10 threshold is federal law, and it applies to all savings accounts, money market accounts, and certificates of deposit (CDs). Some states have additional reporting rules, but the federal requirement is the floor. If you earned less than $10 in interest during the year, the bank is not required to send you a 1099-INT, but you may still owe tax on that interest—the reporting requirement and the tax obligation are separate things.
Interest is taxed as ordinary income at your regular tax rate, not at a capital gains rate. This means a few dollars in savings account interest gets added to your other income and taxed according to your tax bracket. You cannot deduct interest expenses against it unless you borrowed money specifically to fund the account, which is rare.
Key Takeaways
- Banks send Form 1099-INT when interest reaches $10 or more in a calendar year, and you must report this on your tax return.
- Interest income is taxed as ordinary income at your regular tax rate, not as a capital gain.
- If you earned less than $10 in interest, the bank will not send a 1099-INT, but you may still owe tax on that amount if you file a return.
- Multiple accounts at different banks each generate their own 1099-INT if they cross the $10 threshold.
- The IRS matches 1099-INT forms to your Social Security number, so unreported interest can trigger a notice.
How the 1099-INT form works and what it contains
The Form 1099-INT arrives in the mail or electronically, depending on how your bank communicates with you. It shows the account holder's name and Social Security number, the bank's name and tax ID, and the total interest paid during the calendar year. Box 1 of the form lists the interest amount. If you earned interest from multiple accounts at the same bank, they may appear on one form or separate forms depending on the bank's system.
You receive one copy and the bank sends a copy to the IRS. The IRS uses this to cross-check your tax return. If you report different income than what the 1099-INT shows, or if you do not report it at all, the IRS computer system flags the discrepancy and may send you a notice asking for an explanation or additional tax payment.
If you have accounts at multiple banks, each bank sends its own 1099-INT if that account earned $10 or more. You add all of them together on your tax return. If one bank sent a 1099-INT for $8 and another for $7, you still report the combined $15 as interest income, even though neither bank individually crossed the $10 threshold.
What happens if you earned less than $10 in interest
If your savings account earned $9.50 in interest during the year, your bank will not send you a 1099-INT. However, you are still legally required to report that interest on your tax return if you file one. The reporting requirement (the 1099-INT) and the tax obligation are not the same thing.
In practice, the IRS rarely pursues someone for unreported interest under $10, because the tax owed is minimal and the administrative cost of enforcement exceeds the revenue. That said, if you file a return and the IRS later discovers unreported interest through a bank audit or account review, you could face a penalty. The safest approach is to report all interest income, regardless of amount.
If you do not file a tax return at all, the question of whether you owe tax on small interest amounts depends on your total income and filing status. A single person with no other income and less than $14,600 in interest (the 2024 standard deduction) would not be required to file, so the interest would not be taxable. But if you have other income that pushes you over the filing threshold, you must report the interest too.
How interest income affects your tax bracket and refund
Interest is added to your other income—wages, self-employment income, investment gains—and taxed at your marginal rate. If you earn $50,000 in wages and $500 in interest, you report $50,500 in total income. The $500 is taxed at whatever bracket applies to that portion of your income, which depends on your filing status and other deductions.
For most people with modest savings, the tax impact is small. A savings account earning 4% APY on $10,000 generates $400 in annual interest. If you are in the 22% tax bracket, you owe about $88 in federal tax on that interest. Some states also tax interest income, so your total tax bill could be higher.
Interest income can also affect other tax benefits. If you are close to income limits for the Earned Income Tax Credit, the Child Tax Credit, or other phase-out programs, additional interest income could reduce or eliminate those credits. This is less common but worth checking if you are near a threshold.
Reporting interest on your tax return
When you file your federal return using Form 1040, interest income goes on Schedule 1, line 8, labeled "Interest." You enter the total from all your 1099-INT forms combined. If you received a 1099-INT, you also attach a copy to your return or enter the information in the appropriate field if you file electronically.
Most tax software—TurboTax, H&R Block, TaxAct—walks you through this step. You enter the amount from Box 1 of your 1099-INT, and the software automatically places it in the right location on your return. If you use a tax preparer or CPA, bring all your 1099-INT forms with you.
If you earned interest but did not receive a 1099-INT (because it was under $10 or the bank made an error), you still report it. Write the amount on Schedule 1, line 8, and note "no 1099-INT received" if the IRS later asks. Keeping your bank statements as backup documentation is wise.
Interest from joint accounts and accounts held in trust
If you hold a savings account jointly with another person, the bank reports the full interest amount on a 1099-INT to the primary account holder's Social Security number. You and the co-owner must then split the interest income on your individual tax returns according to your ownership percentage. The bank does not automatically split it, so you need to coordinate with the other owner to avoid both reporting the full amount.
For accounts held in trust or for a minor, the rules vary. If a parent holds a savings account in their child's name, the interest is reported under the child's Social Security number on a 1099-INT. The child must report it on their own return if they file one, or the parent may report it on the parent's return if the child does not file. This gets complicated, so consulting a tax professional is worth the cost if significant interest is involved.
State tax reporting for interest income
Most states that have an income tax also tax interest income the same way the federal government does. You report the same interest amount on your state return as you do on your federal return. A few states—including Tennessee, New Hampshire, and South Dakota—do not tax interest income at all, so residents of those states do not report savings account interest to the state.
If you moved during the year or have accounts in multiple states, you may need to file returns in more than one state. The state where you lived on December 31 is typically where you file, but if you moved mid-year, some states require you to file a part-year return. Your tax software or preparer can handle this, but it is worth mentioning if you relocated.
Frequently Asked Questions
What if my bank did not send me a 1099-INT but I know I earned interest?
Contact the bank and ask them to issue a corrected 1099-INT. Banks sometimes miss the $10 threshold due to timing or system errors. If they confirm you earned interest and refuse to send the form, you can still report the interest on your tax return using your bank statements as documentation. Keep those statements in case the IRS asks for proof.
Do I have to report interest from a high-yield savings account differently?
No. A high-yield savings account is treated exactly like a regular savings account for tax purposes. The interest is reported on a 1099-INT if it exceeds $10, and you report it as ordinary income on your tax return. The higher rate does not change the reporting rules, only the amount of interest you earn.
Can I deduct interest I paid on a loan against the interest I earned on savings?
No. Interest you earn on savings is income, and interest you pay on a loan is a separate expense. You cannot net them against each other. Mortgage interest and student loan interest may be deductible under certain conditions, but that deduction is separate from your interest income and does not reduce it.
What if I earned interest but closed the account before the end of the year?
The bank still reports the interest earned during the time you held the account, even if you closed it in December. The 1099-INT reflects interest earned in that calendar year, not when you withdrew the money. You report it the same way as any other interest income.
Do I need to report interest if I am not filing a tax return?
If you are not required to file a tax return based on your income level, you do not have to report interest. However, if you do file a return for any reason—to claim a refund, for example—you must report all interest income, even if it is small. The safest approach is to report it whenever you file.