Yes, you report savings account interest as income on your tax return
The IRS treats interest earned in a savings account as taxable income. You owe federal income tax on that interest in the year you earn it, whether the bank sends you a 1099-INT form or not. The bank's job is to report what you earned; your job is to include it on your tax return.
The threshold for when a bank must send you a 1099-INT is $10 or more in interest during the calendar year. If you earned less than $10, the bank does not have to issue the form—but you still owe tax on the interest if your total income requires you to file a return. The form itself is just documentation; it does not create the tax obligation.
Interest accrues daily but is usually credited to your account monthly or quarterly. That credited amount is what counts as earned income for tax purposes, regardless of whether you withdraw it or leave it in the account.
Key Takeaways
- All savings account interest is taxable income on your federal tax return, even if the amount is small or the bank does not send a 1099-INT form.
- Banks must issue a 1099-INT only if interest reaches $10 or more in a calendar year, but you report interest below that threshold if you file a return.
- Interest is taxed in the year it is credited to your account, not when you withdraw it.
- You report savings interest on Schedule 1 (Form 1040) as part of your total income, and it may affect your tax bracket and may be able to access for certain credits.
- State and local income taxes also explore to savings interest in most states, so check your state's rules separately.
How the 1099-INT form works and what it means
If your savings account earned $10 or more in interest during the year, your bank will mail or email you a 1099-INT by January 31. This form shows the interest amount in Box 1. You receive a copy; the bank sends a copy to the IRS. The form is not a bill—it is a record that the IRS will cross-check against your tax return.
The bank reports interest earned at that specific institution. If you have accounts at multiple banks, you will receive a separate 1099-INT from each one. You add all of them together when you report total interest income on your return.
If you did not receive a 1099-INT but earned interest, you still report it. Keep your bank statements as proof. The absence of a form does not mean the income is unreported—it just means the amount fell below the $10 threshold.
Where interest income goes on your tax return
On Form 1040, you report savings interest on Schedule 1, Part I, Line 8a (labeled "Interest"). This is part of your total income, which determines your tax bracket and whether you owe tax at all. Even a small amount of interest can push you into a higher bracket or reduce a refund you would otherwise receive.
If you have a spouse and file jointly, you combine both spouses' interest income on one line. If you file separately, each spouse reports their own interest on their own return.
Interest income also factors into whether you remain a dependent on someone else's return. If you are claimed as a dependent and your earned and unearned income (including interest) exceeds certain thresholds, you may need to file your own return even if your parents claim you.
When interest is too small to require a return, but you file anyway
The IRS sets a standard deduction—the income level below which you do not owe federal tax. For 2024, that amount varies by age and filing status. If your only income is $100 in savings interest and you are under 65 and single, you fall below the standard deduction and do not owe federal tax, even if you report the interest.
However, you may still want to file a return if you had taxes withheld from other income during the year, because filing allows you to claim a refund. You would report the interest on Schedule 1 even though it does not trigger a tax bill.
State and local taxes work differently. Some states tax interest income regardless of the federal threshold. Check your state's rules—you may owe state tax on interest even if you owe no federal tax.
How interest affects tax credits and benefits
Interest income counts toward your total income, which can affect your may be able to access for tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit. A few hundred dollars in interest might not seem like much, but it can reduce the credit amount you receive or disqualify you entirely if you are close to the income limit.
Interest also counts in the calculation for Medicare premiums, student loan repayment plans, and other benefits that use your modified adjusted gross income (MAGI). If you are on a tight budget and rely on income-based programs, even small interest earnings can have downstream effects.
If you are concerned about how interest will affect your benefits, calculate your total income including the interest before filing. Some people choose to move money to accounts that earn no interest to stay below a threshold, though that is a personal financial decision outside the scope of tax law.
State and local taxes on savings interest
Most states tax interest income the same way the federal government does—as ordinary income. You report it on your state return using the same 1099-INT form or your bank statements. A few states have no income tax at all (including Florida, Texas, and Wyoming), so residents of those states owe no state tax on interest.
Some states offer tax breaks for interest earned on certain savings vehicles, like college savings plans (529 plans) or retirement accounts. Regular savings accounts do not may have access to for these breaks. Check your state's tax website or speak with a tax preparer if you are unsure whether your state taxes interest.
Local income taxes (in cities like New York, Philadelphia, and Columbus) also explore to interest in most cases. The 1099-INT does not distinguish between federal, state, and local tax purposes—you use the same interest figure for all three.
What happens if you do not report interest income
The IRS receives a copy of every 1099-INT issued. If you do not report the interest on your return, the IRS will notice the discrepancy when it matches the form against your filing. This triggers a notice asking you to explain the difference or pay the tax owed plus penalties and interest.
The penalty for not reporting income is typically 20% of the unpaid tax, plus interest that compounds daily. If the IRS determines the omission was intentional fraud rather than an honest mistake, penalties can reach 75% of the unpaid tax. Even small amounts of unreported interest can trigger an audit or correspondence notice.
If you made an honest mistake and did not report interest, you can file an amended return (Form 1040-X) to correct it. Filing an amendment voluntarily before the IRS contacts you often results in lower penalties than waiting for the IRS to find the error.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
The bank does not have to send you a 1099-INT if interest is under $10, but you still owe tax on it if you file a return. Report it on Schedule 1 using your bank statement as documentation. If your total income is below the standard deduction, you may not owe tax, but you still report the interest.
What if I have interest from a joint account with my spouse?
The bank reports the full interest amount on a single 1099-INT. You and your spouse decide how to split it based on your ownership agreement. If you file jointly, you combine both spouses' interest on one line. If you file separately, each spouse reports their share on their own return.
Does interest from a money market account get reported the same way as a savings account?
Yes. Money market accounts, high-yield savings accounts, and traditional savings accounts all generate interest reported on a 1099-INT if it reaches $10. The form and reporting process are identical regardless of account type.
Can I deduct savings account fees from the interest I report?
No. You report the full interest amount on Schedule 1. Savings account fees are not deductible on your personal tax return. You pay tax on the gross interest, then absorb the fees as a cost of maintaining the account.
What if the bank made an error and reported the wrong interest amount on the 1099-INT?
Contact the bank when ready and ask for a corrected form (marked as a correction). The bank will issue a corrected 1099-INT and send a copy to the IRS. You then file your return using the corrected amount. If you already filed using the wrong amount, file an amended return once you receive the correction.