Yes, you must report savings account interest as income on your federal tax return
The IRS treats interest earned in a savings account as taxable income. You report it on your individual income tax return, and you owe federal income tax on that interest at your ordinary income tax rate. This applies whether the account is at a bank, credit union, or online savings platform. The interest is taxable in the year you earn it, even if you don't withdraw the money.
Your bank or credit union will send you a Form 1099-INT (Interest Income) by January 31 each year if you earned $10 or more in interest during that calendar year. You use this form to report the interest on your tax return. If you earned less than $10, the bank is not required to send the form, but you still owe tax on that interest and must report it.
The amount of interest you earn depends on the account's interest rate and your balance. A high-yield savings account earning 4% to 5% annually will generate more reportable interest than a traditional savings account earning 0.01%. Even small amounts add up if you have multiple accounts or a large balance.
Key Takeaways
- All savings account interest is taxable income on your federal return, regardless of the amount.
- Banks send Form 1099-INT when interest reaches $10 or more in a calendar year, but you must report interest below $10 as well.
- You report interest in the year you earn it, not when you withdraw it or when the bank sends the form.
- Your tax rate on interest income is the same as your ordinary income tax rate, which depends on your total income and filing status.
How the 1099-INT form works
The Form 1099-INT arrives in your mailbox or email by January 31. It shows the total interest paid to you during the previous calendar year. The form lists your name, Social Security number, and the bank's name and routing number. Box 1 on the form shows the interest income you must report.
You receive one 1099-INT per financial institution. If you have savings accounts at three different banks, you will receive three separate forms. You add up all the interest from all your forms and report the total on your tax return. The IRS also receives a copy of each 1099-INT, so they know what interest income to expect from you.
If a bank fails to send you a 1099-INT and you earned $10 or more in interest, contact the bank and request a corrected form. If you earned less than $10 and received no form, you still need to report that interest on your return—you can write it in manually or contact the bank for documentation.
Where to report interest on your tax return
On the federal Form 1040 (the main individual income tax return), interest income goes on Schedule 1, Part I, line 8. If you file using tax software, the program will ask you to enter your interest income and will place it in the correct location automatically. If you file by hand, you transfer the total from all your 1099-INT forms to this line.
Interest income is added to your other income (wages, self-employment income, capital gains, and so on) to calculate your total taxable income. The more interest you earn, the higher your total income, which can push you into a higher tax bracket and increase the tax you owe overall.
Some states also tax interest income. If your state has an income tax, you will report the same interest on your state return as well. A few states do not tax interest income, so check your state's rules. Your state tax return instructions will tell you where to report interest.
When you earn less than $10 in interest
Banks are not required to send a 1099-INT if your interest is under $10 for the year. However, you still owe tax on that interest. You must report it on your return even without a form. Write the amount on Schedule 1, line 8, and note that it is interest income.
This situation is common with traditional savings accounts earning very low rates. A $5,000 balance in an account paying 0.01% annually earns only $0.50 in interest—well below the $10 threshold. You still report it, but the tax owed will be minimal (a few cents at most).
How interest is taxed at different income levels
Interest income is taxed as ordinary income, meaning it is taxed at the same rate as your wages or salary. Your tax rate depends on your total income and your filing status. For 2024, federal tax rates range from 10% to 37%, with most people in the 12%, 22%, or 24% brackets.
If you earn $500 in interest and you are in the 22% tax bracket, you owe approximately $110 in federal tax on that interest (before accounting for deductions or credits). If you are in the 12% bracket, you owe about $60. The exact amount depends on your full tax situation, including whether you itemize deductions or claim the standard deduction.
High-yield savings accounts have made interest income more visible for many savers. An account with $100,000 earning 4.5% annually generates $4,500 in interest—a significant amount that will be taxed as ordinary income. This is one reason some people balance high-yield savings with tax-advantaged accounts like IRAs or 401(k)s.
Reporting interest from multiple accounts and institutions
If you have savings accounts at multiple banks, each bank sends its own 1099-INT. You add up all the interest amounts from all the forms and report the total on your tax return. The IRS cross-checks these totals against the copies they receive from the banks, so accuracy matters.
Keep copies of all your 1099-INT forms with your tax records for at least three years. If the IRS questions your return, you will need to show which banks paid you interest and in what amounts. If a form arrives with an error, contact the bank when ready and request a corrected form (marked as a correction on the form itself).
Some people consolidate their savings into fewer accounts to simplify tax reporting, though this is not required. Having five accounts at five banks means five 1099-INT forms, but the total interest reported is the same either way.
Interest from joint accounts and accounts held in trust
If you own a savings account jointly with another person, the bank reports the full interest amount on a 1099-INT to both account holders. You and the co-owner must decide how to split the interest for tax purposes. If you each own 50% of the account, you each report 50% of the interest on your individual returns. The IRS expects the two of you to report matching amounts.
If a savings account is held in a trust, the interest is reported to the trust, not to you personally. The trust files its own tax return (Form 1041) and reports the interest there. You do not report trust interest on your individual return unless the trust distributes that income to you, in which case you receive a Schedule K-1 showing your share.
Accounts for minors (such as a custodial account under the Uniform Transfers to Minors Act) report interest to the minor, not the parent. The minor's Social Security number appears on the 1099-INT. The minor must report the interest on their own return, though a parent may claim the child as a dependent.
Frequently Asked Questions
Do I have to report interest if I didn't receive a 1099-INT form?
Yes. If you earned $10 or more in interest and did not receive a form, contact your bank and request one. If you earned less than $10, you still report it on your return even without a form. The IRS expects all interest income to be reported regardless of whether you receive documentation.
What if my bank sent me a 1099-INT with the wrong amount?
Contact the bank when ready and ask for a corrected form. The bank will issue a new 1099-INT marked as a correction and send copies to you and the IRS. File your tax return using the corrected amount. Keep both the original and corrected forms with your records.
Can I deduct the taxes I owe on interest income?
No. Interest income is added to your total income, and you pay tax on it at your ordinary rate. You cannot deduct the interest itself or the tax owed on it. However, if you have investment expenses or losses, those may offset some of your interest income in certain situations.
Is interest from a money market account reported the same way as savings account interest?
Yes. Money market accounts are treated the same as savings accounts for tax purposes. The bank sends a 1099-INT, and you report the interest on Schedule 1, line 8 of your federal return, just as you would for any other savings account interest.
Do I report interest earned in a CD before it matures?
Yes. Interest on a certificate of deposit is reported in the year you earn it, even if the CD has not yet matured. The bank sends a 1099-INT showing the interest paid during the calendar year. You report it on your return for that year, not when the CD matures or you withdraw the money.