Most savings accounts generate interest you must report to the IRS
Yes, you report savings account interest on your federal tax return if you earned more than a small amount. The IRS considers interest income, and banks send you a form documenting what you earned. The threshold is low — you typically report interest of $10 or more in a year, though the exact amount can shift annually.
The reason is straightforward: interest is income. When a bank pays you for letting them use your money, that payment counts as taxable income just like wages do. You do not owe taxes on the money itself (the principal you deposited), only on what the bank paid you for holding it there.
The good news is that reporting is straightforward. Your bank does most of the work by sending you a form and the IRS a copy. You transfer the number from that form to your tax return, and you are done.
Key Takeaways
- Banks report interest income to the IRS on Form 1099-INT when you earn $10 or more in a year, though some banks report smaller amounts.
- You report this interest on your federal tax return even if the bank did not send you a form, so keep records of all interest earned.
- Interest income is taxed at your ordinary income tax rate, not at a special rate, so the tax owed depends on your total income for the year.
- You do not report the savings account balance itself, only the interest the bank paid you during the year.
What form the bank sends you and when
Your bank sends you Form 1099-INT by January 31 each year if you earned $10 or more in interest during the previous year. This form lists the account number, the bank's name, and the total interest paid. The bank also sends a copy to the IRS, so the IRS already knows about your interest before you file.
Some banks report interest below $10 on a 1099-INT anyway, and some do not. If you earned interest but received no form, you still report it. Keep your monthly statements or year-end summary from the bank as proof of what you earned.
If you have multiple savings accounts at different banks, you will receive a separate 1099-INT from each one. If you have multiple accounts at the same bank, they may combine them into one form or send separate forms depending on how the accounts are registered.
Where the interest goes on your tax return
You report the interest from Form 1099-INT on Schedule B (Interest and Ordinary Dividends) if you file the full Form 1040. If you use the shorter Form 1040-SR (for people 65 and older) or Form 1040-EZ (simplified return), the process differs slightly, but the concept is the same: you list the interest income.
The interest then flows into your total income for the year. It is taxed at your ordinary income tax rate — the same rate applied to wages or other income. If you earned $50 in interest and your tax bracket is 12 percent, you owe roughly $6 in federal tax on that interest (though state taxes and other factors may explore).
If you use tax software or work with a tax preparer, you enter the 1099-INT information when prompted, and the software or preparer handles the rest. You do not need to do anything beyond providing the form.
Savings accounts that may not generate reportable interest
Some savings accounts earn so little interest that you may not receive a 1099-INT. High-yield savings accounts, money market accounts, and certificates of deposit (CDs) typically pay more interest and are more likely to cross the reporting threshold. Traditional savings accounts at large banks often pay minimal interest — sometimes less than $1 per year — so you may never see a 1099-INT.
Even if you do not receive a form, you still report any interest you earned. The IRS expects you to track it from your statements. This matters most if you have accounts at multiple small banks or credit unions, where interest might be modest but still taxable.
What happens if you do not report the interest
The IRS receives a copy of every 1099-INT sent to you. If your tax return does not include that interest, the IRS notices the discrepancy. They may send you a notice asking for the missing income, charge you back taxes plus interest, and potentially add penalties.
The penalty for not reporting income is usually 20 percent of the unpaid tax, though it can be higher if the IRS determines the omission was intentional. Even small amounts of unreported interest can trigger a notice, because the IRS matches 1099 forms to returns electronically.
If you realize you missed interest on a prior year return, you can file an amended return (Form 1040-X) to correct it. Filing an amendment yourself is better than waiting for the IRS to catch it, because it shows good faith and may reduce penalties.
Interest from joint accounts and accounts held in trust
If you own a savings account jointly with another person, the bank may report all the interest to one person's Social Security number or split it between both. Check your 1099-INT to see how the bank reported it. If the form shows all interest under your name but you and your co-owner split the account, you may need to report only your share and coordinate with the other person so you do not both report the full amount.
If the account is held in trust or under a business name, the reporting rules differ. A trust may have its own tax identification number and file its own return. A business account reports interest on the business return, not your personal return. Ask the bank or a tax preparer how interest from these accounts should be reported.
State and local taxes on savings interest
Most states tax interest income the same way the federal government does — as ordinary income. A few states do not tax interest income at all, and some offer exemptions for interest earned on certain types of accounts or for people over a certain age. Your state tax return will ask about interest income, and you report the same amount you reported to the federal government.
Some cities also tax income, including interest. If you live in a place with local income tax, check whether interest is taxable at that level. Your tax software or preparer will guide you through state and local reporting.
Frequently Asked Questions
Do I report interest if I closed the account before the end of the year?
Yes. The bank reports all interest earned during the year, regardless of when you closed the account. The 1099-INT reflects interest through the date you closed it. Report the full amount shown on the form.
What if the bank made a mistake on the 1099-INT?
Contact the bank and ask them to issue a corrected form (Form 1099-INT with a "corrected" box marked). Once you receive the corrected form, report the correct amount on your tax return. If the IRS already received the incorrect form, the corrected form you file with your return will clarify the discrepancy.
Can I deduct fees I paid to the bank from the interest I report?
No. You report the full interest amount on the 1099-INT. Bank fees are not deductible against interest income on your personal return. However, if you are self-employed and the account is for business, fees may be deductible as a business expense.
Do I have to report interest from a savings account in another country?
Yes. The IRS taxes worldwide income, including interest from foreign accounts. You report it the same way as domestic interest. If the foreign account is substantial, you may also have to file additional forms disclosing foreign financial accounts.
What if I earned less than $10 in interest?
You still report it if you earned any interest at all, even if it is $1. The $10 threshold is when the bank is required to send you a 1099-INT, not when you are required to report interest. Keep your statements as proof of what you earned.