You pay tax on the interest your account earns, not on the account balance itself

The IRS taxes interest income from a joint savings account — the money the bank pays you for keeping your balance there. It does not tax the principal, which is the money you and the other account holder deposited. If you have $50,000 in a joint account and it earns $200 in interest over a year, you owe tax on the $200, not the $50,000.

The tax obligation depends on who actually owns the money in the account, not whose names appear on the paperwork. If you deposited all $50,000 yourself and your spouse is just an authorized user, you owe tax on all the interest. If you each deposited $25,000, you each owe tax on half the interest. The bank does not know this breakdown — you have to report it correctly on your tax return.

The bank will send you a Form 1099-INT in January showing the total interest the account earned. If the account earned less than $10 in interest, the bank may not send a form, but you still owe tax on that interest. You report this on Schedule B of your Form 1040, or on Schedule 1 if the interest is under $1,500.

Key Takeaways

  • Interest earned on a joint account is taxable income, but the principal you deposited is not.
  • You owe tax only on the portion of interest that corresponds to your ownership stake in the account.
  • The bank reports total interest on Form 1099-INT, but you must split it correctly between owners on your own tax return.
  • If you and a co-owner disagree about who owns what portion, the IRS will hold both of you responsible for the tax unless you file Form 8082 to dispute the allocation.
  • High-yield savings accounts and money market accounts follow the same tax rules as regular savings accounts.

How the IRS knows about your account interest

Banks report interest to the IRS using Form 1099-INT. The form shows the account number, the total interest paid, and the tax identification number of the person whose name appears first on the account. The IRS matches this form to your tax return to check whether you reported the income.

If the account is in both names, the bank typically reports all the interest under the Social Security number of the first-named owner. This does not mean that person owes all the tax — it just means the IRS will initially see the income reported to that person. If you own the account jointly but in unequal shares, you will need to explain the split on your return or attach a statement showing how you divided the interest.

The IRS does not automatically know the true ownership split. If you and a co-owner later disagree about who owns what, the IRS can assess tax to both of you. You can file Form 8082 (Notice of Inconsistent Treatment) to tell the IRS that you are reporting the income differently than the bank reported it, but you will need documentation showing the actual ownership — such as a written agreement, proof of deposits, or a gift letter if one person gave money to the other.

Reporting interest when you own unequal shares

Suppose you and your adult child opened a joint account. You deposited $30,000 and they deposited $10,000. The account earns $400 in interest. You owe tax on $300 of that interest (75 percent), and your child owes tax on $100 (25 percent). The bank will report all $400 to one of you on the 1099-INT.

When you file your tax return, you report your $300 share on Schedule B. Your child reports their $100 share on their own Schedule B. You may want to attach a note to your return explaining the split, especially if the 1099-INT shows a different amount. Keep records of how much each person deposited and when, in case the IRS asks.

If you cannot agree on the ownership split and the IRS contacts you, you will both be liable for the full tax unless one of you can prove a different arrangement. This is why it matters to document the ownership split in writing when you open the account, or at least to keep deposit records that show who put in what.

Spouses and the standard deduction

If you are married and file jointly, the distinction between your interest and your spouse's interest does not affect your tax bill — you report all household income together. However, if you file separately, you each report only your own share of the interest. Filing separately usually costs more in tax, so most married couples do not do this unless they have a specific reason.

If you are married and file jointly, you do not need to split the interest between you on your return. You report the total interest from all your accounts as one number. The same applies if you are in a registered domestic partnership in a state that recognizes it for tax purposes.

When interest is small enough that you might not owe tax

You owe tax on interest income even if it is small. However, you only have to file a tax return at all if your total income exceeds the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for a single person and $29,200 for married filing jointly. If your total income — including interest, wages, and any other sources — is below that threshold, you do not have to file.

If you do file a return (because you have wages or other income), you must report the interest even if it is $5. The bank may not send you a 1099-INT for interest under $10, but that does not mean you can skip reporting it. You still owe the tax.

High-yield savings accounts and money market accounts

High-yield savings accounts and money market accounts held jointly follow the same tax rules as regular savings accounts. The interest is taxable, and you owe tax on your ownership share. High-yield accounts often pay significantly more interest than traditional savings accounts — sometimes 4 to 5 percent annually — so the tax bill will be larger, but the mechanics are identical.

Certificates of deposit (CDs) also follow the same rule. If you hold a joint CD, you owe tax on your share of the interest. The bank reports the interest on Form 1099-INT, and you report it on your tax return in the same way.

What happens if you do not report the interest

If you do not report interest income on your tax return, the IRS will eventually notice when it compares your return to the 1099-INT the bank sent. The IRS will send you a notice asking you to pay the tax you owe, plus interest on the unpaid tax, plus a penalty. The penalty is usually 20 percent of the unpaid tax, though it can be higher if the IRS determines the underreporting was intentional.

If the interest is small — say, $50 — the IRS may not pursue it aggressively, but it is still technically a violation. The safest approach is to report all interest, even if it is minimal. If you made an honest mistake and did not report interest in a prior year, you can file an amended return (Form 1040-X) to correct it. Filing an amended return voluntarily is much better than waiting for the IRS to contact you.

Frequently Asked Questions

Do I have to pay tax on money my spouse deposited into our joint account?

No. You pay tax only on the interest the account earns, not on the principal. If your spouse deposited $20,000 and you deposited $10,000, you do not owe tax on their $20,000. You each owe tax only on your share of the interest the account generates. If you file taxes jointly, you report all interest together anyway, so the distinction does not affect your bill.

What if I inherited money and put it in a joint account with my sibling?

Inherited money itself is not taxable income. However, any interest the account earns after you deposit it is taxable. If you and your sibling each own half the account, you each owe tax on half the interest. You will need to document how much each of you contributed so you can report the correct share on your tax return.

Can I avoid taxes by putting money in a joint account instead of my own account?

No. The tax on interest depends on who owns the money, not whose name is on the account. If you put your money in a joint account but you own all of it, you owe tax on all the interest. Changing the account structure does not change the tax obligation.

Do I report the interest on my tax return or does the bank handle it?

The bank reports the total interest to the IRS on Form 1099-INT, but you are responsible for reporting your share on your own tax return. If you own an unequal share of the account, you must split the interest correctly yourself. The bank does not know the ownership split, so it cannot do this for you.

What if the bank sent a 1099-INT but I think the amount is wrong?

Contact the bank and ask them to verify the calculation. If they made an error, they will send you a corrected 1099-INT (Form 1099-INT with a "Corrected" box checked). If the amount is correct but you own only part of the account, report your actual share on your tax return and attach a note explaining the split. Keep documentation of the ownership arrangement in case the IRS asks.