Yes, you must report savings account interest as income on your tax return
Any interest your savings account earns counts as taxable income — money the government expects you to report. This is true whether the interest is $1 or $1,000. You do not get to choose whether to include it; the IRS (Internal Revenue Service) requires it on your federal tax return, and most states require it on state returns too.
Your bank will send you a form called a 1099-INT if your interest earned $10 or more in a calendar year. This form shows how much interest you made. Even if your bank does not send you a 1099-INT because the amount was under $10, you still must report the interest if you earned any at all.
The reason is straightforward: interest is income. It is money you did not have to work for — your bank paid you to keep your money there — but it is still yours, and the government taxes income.
Key Takeaways
- All savings account interest must be reported on your federal tax return, even amounts under $10.
- Your bank sends a 1099-INT form only if interest reaches $10 or more in the year, but you report all interest regardless.
- Interest is taxed as ordinary income at your regular tax rate, not at a special lower rate.
- If you have multiple savings accounts, you add up the interest from all of them and report the total.
When your bank sends you the 1099-INT form
Banks mail 1099-INT forms in January or early February for the previous calendar year. The form shows your name, address, Social Security number, the bank's name, and the total interest paid to you during that year.
You will receive the form only if your interest totaled $10 or more. If you earned $8 in interest across all your accounts at that bank, you will not get a 1099-INT — but you still owe tax on that $8. Keep your own records of interest earned if it falls below the $10 threshold.
The bank sends copies to you and to the IRS at the same time. This means the IRS already knows about your interest income. Failing to report it creates a mismatch between what you report and what the IRS has on file, which can trigger a notice or audit.
How interest income affects your taxes
Savings account interest is taxed as ordinary income, meaning it is added to your wages, self-employment income, or other earnings and taxed at your regular rate. If you earn $40,000 a year and your savings account earns $500 in interest, you report $40,500 in total income.
The tax you owe on that interest depends on your overall income and tax bracket. Someone in a lower tax bracket pays less tax on the interest than someone in a higher bracket. There is no special low rate for interest — it is treated the same as any other income.
If your total income is very low, you may not owe any federal income tax at all, even with the interest included. The IRS sets a standard deduction — a minimum amount of income you can earn before you owe federal tax. If your income (including interest) falls below that threshold, you owe no federal tax. State rules vary, so check your state's requirements separately.
Reporting interest on your tax return
When you file your tax return, you report interest income on a form called Schedule B (if you use the long form) or directly on your 1040 (the main federal tax form) if you use the short form. The exact line depends on which form you use.
If you have multiple savings accounts at different banks, you add up all the interest and report the total on one line. You do not list each account separately unless the interest is unusually large or complex.
If you use tax software (like TurboTax or H&R Block's software), the program will ask you to enter your interest income, and it will place it in the correct spot automatically. If you file by hand or with a tax preparer, they will know where to put it.
What happens if you forget to report interest
The IRS matches the 1099-INT your bank sends to them against what you report on your return. If you do not report the interest, the IRS will notice the gap and may send you a notice asking for the missing income and the tax owed on it, plus penalties and interest charges.
Even small amounts matter. A $50 interest payment that you skip reporting can result in a notice. It is not worth the risk — reporting takes seconds if you use tax software, and the tax owed is usually small.
If you realize you missed reporting interest in a prior year, you can file an amended return (Form 1040-X) to correct it. Filing an amendment yourself, before the IRS contacts you, usually results in lower penalties than waiting for them to find the error.
Interest from different types of savings accounts
The rule applies to all savings accounts that earn interest: regular savings accounts, money market savings accounts, and certificates of deposit (CDs). Any account where the bank pays you interest requires you to report that interest.
High-yield savings accounts earn more interest than traditional savings accounts, so the interest you report will be higher — but the reporting requirement is the same. Some people move money to high-yield accounts specifically because the interest is larger, but they must remember that larger interest means a larger tax bill.
Joint accounts (accounts owned by two people) require special attention. If you and another person own a savings account together, the bank reports the interest to both of you on separate 1099-INT forms, split according to each person's ownership share. Make sure you report only your share on your own tax return.
Frequently Asked Questions
Do I have to report interest if it is less than $10?
Yes. The $10 threshold only determines whether your bank sends you a 1099-INT form. You must report all interest you earn, no matter how small. Keep your own records of interest under $10 by checking your account statements.
What if I have savings accounts at multiple banks?
Add up the interest from all your accounts and report the total on your tax return. You do not report each bank separately. If any single bank paid you $10 or more, they will send you a 1099-INT for their portion.
Can I deduct the taxes I pay on savings interest?
No. Interest income is added to your other income, and you pay tax on the total. You cannot deduct the interest itself or the tax you pay on it. The only exception is if you borrowed money to fund the savings account, which is rare and has strict rules.
Do I report interest on my state tax return too?
Most states tax interest income the same way the federal government does. Check your state's tax rules or ask a tax preparer, because a few states have different rules or do not tax interest at all.
What if my bank made a mistake on the 1099-INT?
Contact your bank and ask them to issue a corrected form (called an amended 1099-INT). Once you receive it, file an amended tax return if you already filed. The bank will also send the correction to the IRS, so the records match.