Yes, you must report savings account interest as income on your tax return

Any interest your savings account earns is taxable income. The IRS treats it the same way it treats wages or salary — you owe federal income tax on it. This applies whether you have $50 in interest or $5,000. The only exception is if your total interest for the year falls below a certain threshold, which varies depending on your filing status and age.

Your bank will send you a form called a 1099-INT (Interest Income) if you earned $10 or more in interest during the year. You use this form to report the interest on your tax return. Even if you don't receive a 1099-INT because your interest was under $10, you still owe tax on whatever you earned — you just report it yourself without the form.

The reason the IRS tracks this is straightforward: interest is money you didn't work for, but it's still income. Your bank is required to report it, and the IRS receives a copy of that report. If you don't report it on your return and the IRS notices the mismatch, you'll face penalties and interest charges on the unpaid tax.

Key Takeaways

  • All savings account interest must be reported as income on your federal tax return, regardless of the amount.
  • Your bank sends you a 1099-INT form if you earned $10 or more in interest during the year, and you use this to report the interest.
  • You owe tax on interest even if you don't receive a 1099-INT, such as when interest is under $10.
  • The IRS receives a copy of your 1099-INT from your bank, so unreported interest can trigger penalties if discovered.

When you receive a 1099-INT form

Your bank mails or emails the 1099-INT to you by January 31 of the year following the one in which you earned the interest. For example, interest you earned in 2024 will be reported on a 1099-INT you receive in January 2025. The form shows the total interest earned in that calendar year across all accounts you hold at that bank.

If you have accounts at multiple banks, you'll receive a separate 1099-INT from each one. You must report the interest from all of them on your tax return. The IRS also receives copies of all these forms, so they know how much total interest you earned across all your accounts.

Keep your 1099-INT forms with your tax records. You don't mail them to the IRS — your tax software or tax preparer will reference them when you file. But if the IRS ever questions your return, you'll need to show that the interest you reported matches what the bank reported.

Interest below $10 and when you still must report

If you earned less than $10 in interest during the year, your bank won't send you a 1099-INT. However, you still owe tax on that interest and must report it on your return. You'll write in the amount yourself on the line for interest income — your tax software will have a field for this, or your tax preparer will ask you about it.

This matters because the IRS knows that many people earn small amounts of interest and expects to see it reported. If you have a savings account, even a small one, the IRS assumes you earned something. Not reporting it, even if it's $3, creates a discrepancy between what the IRS expects and what you filed.

How interest income affects your taxes

Interest income is added to your other income — wages, self-employment income, and so on — to calculate your total taxable income. The more interest you earn, the higher your total income, and the more federal income tax you may owe. This can also affect whether you're required to file a return at all, depending on your age and filing status.

For example, if you're single and under 65, you must file a federal return if your income (including interest) is $13,850 or more in 2024. If you're 65 or older, the threshold is higher. These thresholds change each year, so check the IRS website or ask a tax preparer if you're unsure whether you need to file.

Interest income can also push you into a higher tax bracket, meaning a larger percentage of your total income is taxed. It may also affect your may be able to access for certain tax deductions or credits. For this reason, some people with large savings accounts work with a tax preparer to understand the full impact before the year ends.

State and local taxes on interest

In addition to federal tax, many states and some cities tax interest income. The rules vary widely by location. Some states don't tax interest at all, while others tax it at the same rate as federal income. A few states have special rules for interest earned on certain types of savings accounts.

Your bank's 1099-INT shows only federal interest income — it doesn't break out state or local tax obligations. You'll need to check your state's tax website or ask a tax preparer about whether you owe state tax on your interest. If you do, you'll report it on your state income tax return using the same interest amount from your 1099-INT.

What happens if you don't report interest income

The IRS receives a copy of every 1099-INT your bank sends you. If you file a return without reporting the interest shown on that form, the IRS will notice the mismatch. They may send you a notice asking you to explain the discrepancy or demanding payment of the unpaid tax.

If you owe back taxes on unreported interest, you'll have to pay the original tax amount plus interest (charged by the IRS, not your bank) and potentially a penalty for underpayment. The penalty is typically 20% of the unpaid tax, though it can be higher if the IRS determines the underreporting was intentional. Even if it was an honest mistake, you still owe the penalty.

The safest approach is to report all interest, no matter how small. It takes minutes, and it keeps you in compliance with tax law. If you're unsure how to report it, a tax preparer or free tax software can walk you through the process.

Frequently Asked Questions

What if I earned interest but didn't get a 1099-INT?

If you earned less than $10, your bank won't send a 1099-INT, but you still report the interest on your return. Write the amount on the interest income line. If you earned $10 or more and didn't receive a form by early February, contact your bank — they may have sent it to an old address or email.

Do I report interest from a joint savings account?

The bank reports the full interest amount on a 1099-INT to the account owner listed first on the account. If you're a joint owner, you and the other owner need to decide how to split the interest for tax purposes and report your share on your return. This is a conversation to have with the other owner and possibly a tax preparer.

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

No. You report the full interest amount shown on the 1099-INT, not the interest minus fees. Savings account fees are not deductible on your federal return. However, some states allow deductions for certain banking fees — check your state's rules.

What if I closed my savings account during the year?

You still report all interest earned in that calendar year, even if you closed the account in December. The 1099-INT will show the interest earned through the date you closed it. Report the full amount on your return.

Does interest from a high-yield savings account get reported differently?

No. High-yield savings accounts earn more interest than traditional savings accounts, but the IRS treats it the same way. You'll receive a 1099-INT if you earned $10 or more, and you report it on your return just like any other interest income.