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, regardless of whether you withdraw the money or leave it in the account. Most banks and credit unions send you a Form 1099-INT each January if you earned $10 or more in interest during the previous year — that form tells you exactly how much to report.

The amount you owe in tax depends on your overall income and tax bracket. A person in the 22% tax bracket pays roughly 22 cents in federal tax for every dollar of interest earned. State income tax may explore as well, depending on where you live. Some states tax savings interest; others do not.

If you earned less than $10 in interest, the bank will not send you a 1099-INT, but you still owe tax on that amount if you file a return. You report it yourself using the information from your account statements.

Key Takeaways

  • Banks report savings interest of $10 or more on Form 1099-INT, which you receive by January 31 each year.
  • You report this interest on your federal tax return as ordinary income, taxed at your marginal tax rate.
  • Interest earned in high-yield savings accounts, money market accounts, and certificates of deposit all count as taxable income.
  • Some states do not tax savings interest, so your state tax obligation depends on where you live and file.
  • If you earned less than $10 in interest, you report it yourself using your account statements, even though you will not receive a 1099-INT.

Where the interest appears on your tax forms

You report savings interest on Form 1040, Schedule 1 (Additional Income and Adjustments to Income) in the section labeled "Interest." If you use tax software, it will ask you for this amount and place it in the correct location automatically.

If you have multiple savings accounts, you add up all the interest from all of them and report the total on one line. You do not need to list each account separately on your return, though you should keep your 1099-INT forms and account statements for your records in case the IRS asks questions later.

The interest you report flows into your adjusted gross income (AGI), which affects how much tax you owe overall and may change whether you can claim certain deductions or credits. This is why even small amounts of interest matter — they can push you into a higher tax bracket or reduce a tax benefit you were counting on.

What counts as interest income and what does not

Interest from savings accounts, money market accounts, and certificates of deposit (CDs) all count. So does interest from bonds, Treasury bills, and any other investment that pays you interest rather than dividends or capital gains.

Dividends from stocks and mutual funds are reported differently — on Form 1099-DIV, not 1099-INT — and may be taxed at a lower rate if they are may have access to dividends. Capital gains (profit from selling an investment for more than you paid) also have their own reporting and tax treatment. If you are unsure whether a payment is interest or something else, the 1099 form you receive will tell you which category it falls into.

Transfers between your own accounts do not count as income. If you move money from a checking account to a savings account, that is not taxable. Only the interest the bank pays you is taxable.

How high-yield savings accounts affect your taxes

A high-yield savings account earns more interest than a traditional savings account, which means you owe more tax on the earnings. If you earn 4.5% annual interest on $10,000, that is $450 in interest income — and you report all $450 on your tax return, regardless of the account type.

The tax treatment is identical to a regular savings account. The only difference is the amount of interest you earn, which means a higher tax bill. Some people move money to high-yield accounts specifically because the interest rate is better, but they should factor in the tax cost when deciding whether the higher rate is worth it.

If you are in a high tax bracket, the after-tax return on a high-yield savings account may be lower than you think. A 4.5% interest rate sounds good until you realize that 22% federal tax plus your state tax means you keep roughly 3.3% of the earnings after taxes.

When you receive the 1099-INT and what to do with it

Banks and credit unions mail Form 1099-INT by January 31 each year. The form shows interest earned during the previous calendar year. You receive one copy in the mail, and the IRS receives another copy automatically, so the IRS already knows about your interest income before you file your return.

Keep the 1099-INT with your tax records for at least three years. If you file electronically, you do not need to mail the form to the IRS — you just report the amount shown on it. If you file by paper, you do not attach the 1099-INT to your return either; you straightforward use the information to fill in the correct line on your tax forms.

If you receive a 1099-INT and the amount is wrong, contact the bank when ready and ask them to issue a corrected form. If the bank does not correct it, you can file an amended return showing the correct amount, and the IRS will adjust your account accordingly.

Interest earned before you turn 18 or in a dependent's account

If you are a minor and earn interest in your own savings account, you still owe tax on it. However, there is a threshold: if your total unearned income (interest, dividends, and capital gains combined) is below a certain amount, you may not owe federal income tax. For 2024, that threshold is $1,300 for a dependent. Your parents or guardians may be able to claim you as a dependent on their return, which affects how much you owe.

If a parent opens a savings account in a child's name and the child earns interest, that interest is taxable to the child, not the parent. The parent cannot claim the interest as their own income. However, some parents use a strategy called the "Kiddie Tax" rules, which allow them to report a dependent child's unearned income on the parent's return under certain conditions — this is complex and worth discussing with a tax professional if the amounts are large.

State income tax on savings interest

Federal income tax is not the only tax you may owe on savings interest. Most states that have an income tax also tax interest income. However, some states do not tax interest at all, and a few states tax only certain types of interest.

If you live in a state with no income tax — such as Florida, Texas, or Wyoming — you owe no state tax on your savings interest, only federal tax. If you live in a state with income tax, you typically report the same interest amount on your state return that you reported on your federal return. Some states allow deductions or credits for certain types of interest, so check your state's tax rules or speak with a tax professional if you are unsure.

Frequently Asked Questions

Do I have to report interest if I earned less than $10?

Yes. The bank does not send you a 1099-INT for amounts under $10, but you still owe tax on the interest. You report it yourself using your account statements. The IRS does not have a record of it unless you report it, but you are legally required to include it on your return.

What if I earned interest in multiple banks?

Add up all the interest from all your accounts and report the total on one line of your tax return. You will receive a separate 1099-INT from each bank, but you combine them into a single number when you file. Keep all the 1099-INT forms with your records.

Can I deduct the taxes I paid on savings interest?

No. Interest income is taxable, and you cannot deduct the tax you owe on it. However, if you paid state income tax on the interest, you may be able to deduct that state tax as part of your state and local tax (SALT) deduction, up to a limit of $10,000 per year.

Does a joint savings account get reported twice on taxes?

No. The bank reports the total interest on one 1099-INT. If the account is jointly owned, you and the other owner must decide how to split the interest for tax purposes — usually 50/50, but you can split it differently if you have a written agreement. Each owner reports their share on their own tax return.

What if the bank sent me a 1099-INT but I did not earn that much interest?

Contact the bank and ask them to issue a corrected form. Errors happen — the bank may have credited interest to the wrong account or made a calculation mistake. Once you have the corrected 1099-INT, file your return using the correct amount. If you already filed, you can file an amended return.