Yes, you must report savings account interest on your tax return if you earn more than a small threshold

The IRS requires you to report interest income from savings accounts on your federal tax return. The threshold is low: if you earned $10 or more in interest during the year, you must report it. Your bank will send you a Form 1099-INT in January showing how much interest you earned, and you'll use that form to fill out your tax return.

The requirement applies whether you're filing a full return or a simplified one. It doesn't matter if the interest is small or if you didn't withdraw the money—the IRS counts it as income the moment it posts to your account. Failing to report it can trigger a notice from the IRS, even if the amount seems trivial.

Key Takeaways

  • You must report savings account interest of $10 or more per year on your federal tax return using the Form 1099-INT your bank sends you.
  • Interest counts as taxable income at your ordinary income tax rate, not at a special rate, so it increases your total income for the year.
  • If you earn less than $10 in interest, you don't have to report it, but you still can if you want to be thorough.
  • The IRS matches the 1099-INT your bank files with your tax return, so underreporting or omitting it is likely to be caught.

How the IRS knows about your interest income

Your bank is required to file a copy of your 1099-INT with the IRS and send you a copy by January 31 each year. The IRS receives that same form, so they know exactly how much interest you earned. If your tax return doesn't show that income, the IRS will notice the mismatch.

This automatic reporting system is why you can't straightforward ignore small amounts of interest. Even $15 in interest will be flagged if you don't report it. The IRS doesn't care whether you knew about the requirement or whether the amount seems insignificant—the form was filed, and your return must match.

What counts as interest income you have to report

Interest from savings accounts, money market accounts, and certificates of deposit (CDs) all count. So does interest from any other bank or credit union account that earns interest. If you have multiple accounts, add up all the interest from all of them—the $10 threshold applies to your total interest income, not to each account separately.

Interest that is automatically reinvested (added back to your account) counts just as much as interest you withdraw. The IRS counts it as income when it posts, regardless of whether you touch the money. Some accounts also pay interest on interest (compound interest), and all of that is reportable.

Where to report interest on your tax return

On the standard Form 1040, interest income goes on Schedule 1, line 8a. If you're using tax software, it will ask you for the amount from your 1099-INT and put it in the right place automatically. The interest is added to your other income (wages, self-employment income, and so on) to calculate your total taxable income for the year.

If you have more than one 1099-INT, add them all together and report the total. You don't need to list each account separately on your return, though you should keep the forms for your records in case the IRS asks.

How interest income affects your taxes

Interest is taxed at your ordinary income tax rate, which depends on your total income and filing status. If you're in the 22% tax bracket, for example, $100 in interest will cost you about $22 in federal income tax (before any deductions or credits). State income tax may explore as well, depending on where you live.

Interest income can also push you into a higher tax bracket if you're close to the edge. If you earn $50,000 in wages and $5,000 in interest, the IRS treats you as earning $55,000 total, which may move you into a higher bracket. This is one reason some people move money to high-yield savings accounts only when they need it—to keep interest income in years when they earn less from other sources.

The $10 threshold and when you can skip reporting

If your total interest income for the year is less than $10, you don't have to report it on your federal return. However, your bank will still send you a 1099-INT if you earned any interest at all, so you'll know the exact amount. Many people report it anyway because the amount is so small and because reporting it is simpler than trying to explain why it's missing.

The $10 rule is a federal rule only. Some states have their own thresholds or rules for reporting interest income, so check your state's tax instructions if you file a state return. A few states don't tax interest income at all, which can save you money if you live in one of them.

What to do if you don't receive a 1099-INT

If you earned interest but didn't receive a 1099-INT by early February, contact your bank. Banks are required to send them, and if yours didn't, the bank made an error. Ask for a corrected form or a statement showing your interest earnings. You'll need that information to file your return accurately.

If you earned interest from a bank that closed or merged, the successor bank should send you the form. If you can't locate it, call the bank's customer service line and ask for a duplicate 1099-INT. Keep a record of when you requested it in case the IRS asks later.

Frequently Asked Questions

Do I have to report interest if I didn't withdraw it?

Yes. The IRS counts interest as income when it posts to your account, not when you withdraw it. Even if the interest sits in your account untouched, you must report it on your tax return if it's $10 or more.

What if I have interest from multiple banks?

Add up all the interest from all your accounts. If the total is $10 or more, you report the combined amount on your return. You'll receive a separate 1099-INT from each bank, but you report them as one total on Schedule 1.

Can I deduct the taxes I pay on interest income?

No. Interest income is added to your other income, and you pay tax on the combined total. You cannot deduct the interest itself or the tax you pay on it. Some investment-related expenses can be deducted, but savings account interest is not one of them.

What happens if I report interest wrong or forget to report it?

The IRS will likely catch it because your bank's 1099-INT is filed with them. You may receive a notice asking you to file an amended return. If the amount is small, the IRS may straightforward assess the tax owed plus a penalty. It's better to report it correctly the first time.

Does interest from a joint account get split between account holders?

That depends on how the account is set up and your state's rules. Some joint accounts split interest equally; others report it all to one person. Ask your bank how they report interest on your specific account, and make sure your 1099-INT matches what you report on your return.