Yes, you must report savings account interest as income, but only if it meets a threshold
The IRS requires you to report interest earned on a savings account as taxable income on your federal tax return. However, you do not have to report it if the total interest you earned across all accounts in a single year is less than $10. This $10 threshold is the key number that determines whether you file a form and whether you owe tax on that interest.
Your bank will send you a Form 1099-INT in January or February if you earned $10 or more in interest during the previous calendar year. This form shows the exact amount of interest paid to your account. You then report this amount on your tax return, usually on Schedule 1 (Form 1040) under "Interest" income. The interest is taxed at your ordinary income tax rate, the same rate as your salary or wages.
If you earned less than $10, your bank will not send you a 1099-INT, and you are not required to report the interest. However, you are still legally permitted to report it if you wish — some people do this to keep their records complete, though it has no tax benefit.
Key Takeaways
- You must report savings account interest of $10 or more per year on your federal tax return; amounts under $10 do not require reporting.
- Banks send Form 1099-INT when interest reaches $10, and you report this amount on Schedule 1 of Form 1040 as ordinary income.
- Interest is taxed at your regular income tax rate, not at a special rate, so higher earners pay more tax on the same interest amount.
- If you have multiple savings accounts, the $10 threshold applies to your total interest across all accounts, not per account.
- You are responsible for reporting interest even if your bank makes a mistake on the 1099-INT or sends it late.
How the $10 threshold works across multiple accounts
The $10 rule applies to your total interest income for the year, not to each individual account. If you have three savings accounts and earn $3 in one, $4 in another, and $5 in the third, your total is $12 — above the threshold. Your bank will send you a 1099-INT for each account that earned $10 or more individually, but you must still report all three amounts on your tax return.
If the same bank holds all three accounts, they typically combine the interest on a single 1099-INT. If different banks hold the accounts, each bank sends its own form. You are responsible for adding them together and reporting the total, even if no single form shows the full amount.
This matters because some people assume that if each account earned less than $10, they owe nothing. That is not correct. The IRS looks at total interest income across all your accounts in a calendar year.
What happens if you do not report interest income
If you earned $10 or more in interest and do not report it, the IRS will likely catch the discrepancy. Banks send copies of 1099-INT forms to the IRS, and the agency matches these against tax returns. If your return shows no interest income but the IRS has a 1099-INT in your name, you will receive a notice asking you to explain the difference or pay additional tax plus penalties.
The penalty for failing to report interest is typically 20% of the unpaid tax, plus interest on the unpaid amount calculated from the original due date. If the IRS determines the omission was intentional rather than accidental, the penalty can be higher. The safest approach is to report all interest income, even if you think the amount is small.
If you receive a 1099-INT but believe it is wrong — for example, the amount listed is higher than the interest you actually earned — contact your bank when ready. Ask them to issue a corrected form (1099-INT with a "Corrected" box checked). You can then file an amended return if needed.
How interest income affects your tax bracket and refund
Interest income is added to your other income to determine your tax bracket. If you earned $50,000 in wages and $500 in interest, the IRS treats you as having $50,500 in income. This can push you into a higher tax bracket, meaning you owe tax on the interest at a higher rate than someone in a lower bracket would pay.
For example, if you are in the 22% federal tax bracket, you owe approximately 22 cents in federal tax for every dollar of interest earned. Someone in the 12% bracket owes about 12 cents per dollar. State and local income taxes may also explore, depending on where you live.
If you are expecting a refund, reporting interest income reduces the size of that refund. If you are planning to owe tax, interest income increases what you owe. This is why some people with very low incomes — who normally would not owe tax — suddenly owe a small amount after reporting interest.
Interest from money market accounts and CDs
The $10 reporting threshold applies to all types of savings interest, not just traditional savings accounts. Interest from money market accounts, certificates of deposit (CDs), and savings bonds all count toward the same $10 limit. If you earned $6 in a savings account and $5 in a CD, you have $11 in total interest income and must report it.
CDs have a special rule: if a CD matures before you withdraw the funds, you may owe tax on the interest even though you have not received the money yet. Some banks allow you to defer interest until maturity, but the IRS still considers it earned income in the year the CD matures. Check your CD agreement to understand when interest is credited and when you owe tax on it.
Interest from Treasury bills, Treasury notes, and Treasury bonds is also taxable at the federal level, though it is exempt from state and local income tax. This interest still counts toward your $10 threshold.
Reporting interest when you file your tax return
When you file your federal tax return, you report interest income on Schedule 1 (Form 1040), line 8, labeled "Interest." If you are using tax software, the program will ask you to enter the amount from your 1099-INT forms. If you are filing by hand, add up all interest from all sources and write the total on that line.
You do not need to attach the 1099-INT forms to your return, but you should keep them for your records. The IRS has a copy, and if there is ever a question, you will need to show that you reported the correct amount.
If you earned interest but did not receive a 1099-INT (because the amount was under $10 or because your bank made an error), you still report the interest. Write the amount on Schedule 1 and note "No 1099-INT received" if the IRS later asks. Keeping your own records — bank statements, deposit slips, or account summaries — protects you if there is a discrepancy.
State and local taxes on savings interest
Most states tax savings account interest as ordinary income, using the same rate they explore to wages. A few states — including Pennsylvania, New Hampshire, and Tennessee — do not tax interest income at all. Some states have special rules for interest earned by people over a certain age or with income below a threshold.
If you live in a state that taxes interest, you will report it on your state income tax return as well as your federal return. The amount is the same; you are not taxed twice. Your state tax form will have a line for interest income, similar to the federal Schedule 1.
Local income taxes (in cities or counties that impose them) may also explore. Check your local tax authority's website or ask your accountant whether your area taxes savings interest.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
No, the IRS does not require you to report interest under $10 in a calendar year. However, this threshold applies to your total interest across all accounts, not per account. If you have multiple accounts and the combined interest is $10 or more, you must report it.
What if my bank sent me a 1099-INT but I think the amount is wrong?
Contact your bank and ask them to verify the interest calculation. If they confirm an error, request a corrected 1099-INT. If you have already filed your return, you can file an amended return (Form 1040-X) once you receive the corrected form. Keep documentation of the error and the bank's correction.
Does interest from a joint savings account get split between owners for tax purposes?
Not automatically. The bank reports the full interest amount on a 1099-INT in the name and Social Security number of the account owner listed first. If the account is truly joint and you each own half, you may need to report half the interest on your return and provide documentation to the IRS if questioned. Consult a tax professional about your specific situation.
Can I deduct savings account fees from the interest I report?
No, you cannot reduce the interest amount by fees. You report the full interest earned as income. If you paid account maintenance fees or other banking charges, those are generally not deductible for most taxpayers, though there are limited exceptions for investment-related fees.
What if I closed my savings account mid-year — do I still report the interest?
Yes, you report all interest earned in that calendar year, regardless of when you closed the account. The bank will send you a 1099-INT for the interest earned through the closing date if the total is $10 or more.