You report the interest your savings account earns, not the account balance itself

The IRS does not care how much money sits in your savings account. What matters is the interest income the account generates each year. If your savings account earned interest, that interest is taxable income and must be reported on your federal tax return. The bank will send you a form showing how much interest you earned, and that is the number you report — not your account balance.

The threshold for reporting is low. If you earned $10 or more in interest during the year, your bank will send you a Form 1099-INT by January 31. You must report this income even if you do not receive the form. If you earned less than $10, you still report it, but the bank will not send you documentation.

State taxes work the same way. Most states tax interest income at your ordinary income tax rate. A few states — including Pennsylvania, Illinois, and Mississippi — do not tax interest income at all, so check your state's rules if you live in one of those places.

Key Takeaways

  • You report interest earned on your savings account, not the account balance itself.
  • Banks send Form 1099-INT when interest reaches $10 or more in a calendar year.
  • Interest income is taxable at both federal and state levels in most states.
  • You must report interest income even if the bank does not send you a form.
  • High-yield savings accounts generate more interest, so they trigger reporting requirements more often than traditional savings accounts.

How banks report your interest income

Your bank calculates interest daily or monthly depending on the account type and deposits it into your account. At the end of the calendar year, the bank totals all interest paid to you and reports it to the IRS on Form 1099-INT. The form shows your name, Social Security number, the bank's name, and the total interest earned.

The bank mails or makes the form available electronically by January 31 each year. You receive Copy B, and the IRS receives Copy A. When you file your tax return, you report the interest amount from Box 1 of the 1099-INT on Schedule 1 (Form 1040), which feeds into your total income.

If you have multiple savings accounts at different banks, each bank sends its own 1099-INT. You add up all the interest from all forms and report the total. If you have accounts at the same bank, the bank may combine them into one form.

What counts as interest income you must report

Interest is the money the bank pays you for letting them use your deposits. This includes:

  • Interest from regular savings accounts
  • Interest from money market accounts
  • Interest from certificates of deposit (CDs)
  • Interest from high-yield savings accounts
  • Bonus payments banks sometimes offer for opening an account (if the bonus is paid as interest)

Some banks offer sign-up bonuses that are not interest — they are just cash gifts. If the bonus is labeled as a bonus and not interest, it may not be reported on a 1099-INT. However, the IRS still considers it taxable income in most cases, so you may need to report it even without a form. Check the bank's documentation to see how they classified the bonus.

Dividends from savings accounts at credit unions are treated the same way as bank interest and are reported on a 1099-INT or 1099-DIV depending on the institution.

When you do not have to report interest income

If your savings account earned less than $10 in interest during the year, the bank will not send you a 1099-INT. However, you still owe tax on that interest — you just have to track it yourself. Many people with small balances or low-rate accounts fall into this category.

If you have no income at all and your only income is interest under $10, you do not have to file a federal tax return. But if you have other income — wages, self-employment income, or interest from other accounts — you must file and report the interest.

Some savings accounts earn no interest at all. Basic checking or savings accounts at traditional banks often pay zero interest. If your account earned nothing, there is nothing to report.

How interest income affects your tax bracket and refund

Interest income is added to your other income — wages, self-employment income, investment gains — to calculate your total taxable income. This can push you into a higher tax bracket, which means a larger portion of your income is taxed at a higher rate. Even a small amount of interest can affect your tax liability.

If you are retired and living on Social Security plus interest income, the interest can trigger taxation of your Social Security benefits. The IRS uses a formula called "combined income" that includes half your Social Security plus all your other income, including interest. If combined income exceeds certain thresholds ($25,000 for single filers, $32,000 for married filing jointly), a portion of your benefits becomes taxable.

If you had taxes withheld from your paychecks during the year, interest income might reduce your refund or increase the amount you owe. Use a tax calculator or work with a tax preparer to see the impact before you file.

Reporting interest on your tax return

On Form 1040, you report interest income on Schedule 1, Part I, Line 8. If you have a 1099-INT, copy the amount from Box 1 directly onto this line. If you have multiple 1099-INTs, add them together and enter the total.

If you earned less than $10 and have no 1099-INT, you still enter the interest amount on Line 8. Keep your own records — a statement from the bank or a spreadsheet you created — in case the IRS asks.

If you file electronically, tax software will walk you through entering the 1099-INT information. If you file by hand, make sure the name and Social Security number on your return match the name and SSN on the 1099-INT exactly, or the IRS may not match the forms and could send you a notice.

Frequently Asked Questions

Do I have to report interest if I did not receive a 1099-INT?

Yes. If you earned $10 or more in interest, you must report it even if the bank did not send a form. If you earned less than $10, you still owe tax on it, but the bank has no obligation to send documentation. Check your account statements to find the interest earned.

What if the 1099-INT has the wrong amount or my name is spelled wrong?

Contact the bank when ready and ask them to issue a corrected form (Form 1099-INT with "CORRECTED" printed on it). Do not file your tax return until you have the correct form. If you already filed and the IRS catches the error, they will send you a notice and you may owe penalties.

Can I deduct savings account fees from the interest I report?

No. You report the full interest amount on your tax return. You cannot subtract fees or other costs. However, if you have significant investment expenses, you may be able to deduct them on Schedule A as miscellaneous itemized deductions, but this applies mainly to investment advisory fees, not bank fees.

Does a joint savings account change how I report interest?

The bank reports the full interest amount on a 1099-INT in the name of the account owner listed first. If the account is truly joint, you and the other owner should split the interest income on your separate tax returns based on your ownership percentage. Keep documentation of the split in case the IRS asks.

What if I closed my savings account mid-year?

The bank reports all interest earned up to the date you closed the account. You report that interest on your tax return for the year you closed it, not the year you opened it. If you closed the account in December, you still report the interest on that year's return.