You must report savings account interest on your tax return if you earned more than $10 in a year, but the bank does the tracking for you

The IRS requires you to report interest income on your federal tax return. Your bank sends you a Form 1099-INT each January showing how much interest you earned the previous year. If the total interest across all your accounts was $10 or more, you report it. If it was less than $10, you do not have to report it — though you can if you want to be thorough.

The bank reports this to the IRS automatically, so they already know what you earned. Failing to report it when you should is a discrepancy the IRS can catch. That said, the IRS rarely pursues cases where the unreported amount is small, but it is still technically required.

The interest gets taxed as ordinary income at your regular tax rate, not at a special rate. If you earned $50 in interest and your tax bracket is 22%, you owe roughly $11 in federal tax on that interest (before any deductions or credits that might lower your overall bill).

Key Takeaways

  • Your bank sends you Form 1099-INT in January showing all interest earned in the previous year, and you must report it if the total was $10 or more.
  • Interest income is taxed as ordinary income at your regular tax rate, not at a lower rate.
  • The IRS receives a copy of your 1099-INT, so unreported interest can show up as a discrepancy on your return.
  • If you have accounts at multiple banks, you add up the interest from all of them to determine whether you hit the $10 threshold.
  • You report the interest on Schedule 1 (Form 1040) or on your tax software's interest income section when you file.

How the $10 threshold works

The $10 rule applies to the total interest you earned across all your savings accounts, checking accounts, money market accounts, and CDs combined — not per account. If you have $50 in interest at Bank A and $8 at Bank B, you owe $58 total and must report it.

Each bank only sends you a 1099-INT for interest they paid you directly. If you earned less than $10 at one bank, that bank may not send you a form at all. But you still have to add up what you earned everywhere and report the total if it crosses $10.

Keep your own records of interest earned, especially if you have accounts at multiple institutions. Your bank statements show the interest posted each month, so you can add them up yourself to verify what the 1099-INT says.

What happens when you report the interest

You report interest income on Schedule 1 of Form 1040 (the main federal income tax form) or directly in your tax software's interest income section. The software usually walks you through it — you enter the amount from your 1099-INT, and it flows to the right line.

The interest gets added to your other income for the year, which may push you into a higher tax bracket if you are close to the edge. For most people with modest savings, the tax impact is small — a few dollars on a few hundred dollars in interest.

If you file electronically, the IRS matches your reported interest against the 1099-INT the bank sent them. If the numbers match, there is no problem. If you report less than what the bank reported, the IRS may send you a notice asking for the difference.

State taxes and interest income

Most states that have an income tax also require you to report interest income on your state return. The rules vary by state — some states tax interest the same way the federal government does, while others have different thresholds or exemptions.

A few states do not tax interest income at all. If you live in one of those states (such as Texas, Florida, or Tennessee), you still report interest to the IRS, but you do not owe state tax on it. Check your state's tax authority website to confirm how your state treats interest.

Your tax software usually handles state reporting automatically once you enter your state, so you do not have to figure this out separately.

What to do if you did not get a 1099-INT

If you earned less than $10 at a bank, that bank is not required to send you a form. But you still have to report the interest if your total across all accounts was $10 or more. Look at your bank statements from the previous year and add up the interest posted each month.

If you earned $10 or more total but one of your banks did not send a 1099-INT, contact that bank and ask for one. They may issue it late, or they may confirm that the amount was under $10 and they are not required to send it. Either way, you report what you actually earned.

If a bank closes an account mid-year, they still send you a 1099-INT for the interest earned before the account closed. Check your mail carefully in January and February, as some banks mail forms later than others.

Interest from CDs and money market accounts

Interest from certificates of deposit (CDs) and money market accounts is reported the same way as savings account interest — on a 1099-INT. If you have a CD that matured and paid interest, that interest is taxable in the year you received it, even if you when ready rolled the money into a new CD.

If you withdrew money from a CD early and paid an early withdrawal penalty, you can deduct that penalty on your tax return. The interest is still taxable, but the penalty reduces your net interest income.

Some CDs pay interest monthly or quarterly, while others pay it all at maturity. Either way, the bank reports the total on the 1099-INT for the year the interest was credited to your account.

Frequently Asked Questions

What if I earned interest but the bank did not send me a 1099-INT?

Banks are only required to send a 1099-INT if you earned $10 or more at that institution. If you earned less, they do not have to send one. But if your total interest across all accounts was $10 or more, you still have to report it. Check your statements and add up the interest yourself.

Do I have to report interest if I earned less than $10 total?

No, you do not have to report interest under $10. However, you can report it if you want to. Some people report it anyway to keep their records clean, but it is not required.

Can I deduct anything against the interest I earned?

You cannot deduct the interest itself, but you can deduct certain expenses related to earning it — for example, a safe deposit box fee or investment advisory fees. These deductions are limited and have specific rules, so check with a tax professional if you think you have may have access to expenses.

What if I moved money between my own accounts during the year?

Moving money between your own accounts does not create taxable income. Only the interest the bank paid you is taxable. Transfers between accounts you own are not income.

Do I owe taxes on interest if I am a dependent?

Yes, you still have to report interest income even if someone else claims you as a dependent. However, if your total income (including interest) is below a certain threshold, you may not owe tax. The threshold depends on your age and filing status, so check the IRS rules for dependents.