Yes, you must report savings account interest as income if it exceeds a certain threshold
The IRS requires you to report interest earned on savings accounts as taxable income. The threshold is $10 of interest or more in a calendar year. If your savings account earned less than $10 in interest during the year, you do not have to report it. Your bank will send you a Form 1099-INT in January or February showing the interest paid to you in the previous year, and you report that amount on your tax return.
The reason is straightforward: interest is income. The money your bank pays you for letting them hold your deposits is treated the same way the IRS treats wages or freelance earnings—it adds to your taxable income for the year. The amount matters less than the fact that you received it.
This applies to all types of savings accounts: regular savings accounts, money market accounts, and certificates of deposit (CDs). High-yield savings accounts generate more interest, so they are more likely to cross the $10 threshold, but the reporting rule is the same regardless of the account type or the interest rate.
Key Takeaways
- You must report savings account interest of $10 or more per year on your tax return, even if no one sends you a form.
- Your bank sends a Form 1099-INT showing the interest you earned, and you report that figure on your tax return.
- Interest under $10 in a calendar year does not have to be reported, but you can report it if you want to.
- Interest is taxed as ordinary income at your regular tax rate, not at a special rate.
How the $10 threshold works in practice
The $10 rule is per account holder per year, not per account. If you have three savings accounts at the same bank and they earn $3, $4, and $5 in interest respectively, the total is $12 and you must report it. If you are married and file jointly, you and your spouse each have a separate $10 threshold—your spouse's $8 in interest does not combine with your $7 to trigger reporting.
The threshold applies to the calendar year, January 1 through December 31. Interest earned in 2024 is reported on your 2024 tax return, which you file in early 2025. If you close a savings account mid-year, any interest earned up to the closing date counts toward that year's total.
If you earn exactly $10, you report it. The threshold is $10 or more, not more than $10. Many people with high-yield savings accounts earning 4% to 5% annually will exceed this threshold even with modest balances—$200 in a high-yield account earning 5% generates $10 in a year.
What Form 1099-INT is and when you receive it
A Form 1099-INT is a tax document your bank sends you showing interest paid to you during the year. You receive it by January 31 of the following year. The form shows your name, Social Security number, the bank's name and identification number, and the total interest paid. If you earned interest at multiple banks, you receive a separate 1099-INT from each one.
You do not need to attach the 1099-INT to your tax return when you file, but you keep it for your records. The IRS receives a copy directly from the bank, so the IRS knows how much interest you earned. If you report a different amount or fail to report interest the IRS knows about, the discrepancy can trigger a notice.
If you earned less than $10 in interest, your bank typically does not send a 1099-INT. However, some banks send them anyway, and some do not. If you do not receive a form but you know you earned interest, you still report it if it was $10 or more.
How interest income affects your tax bill
Interest is taxed as ordinary income, meaning it is added to your other income and taxed at your regular tax rate. If you are in the 22% tax bracket, $100 in interest adds roughly $22 to your tax bill. If you are in the 12% bracket, it adds roughly $12. The exact impact depends on your total income for the year and your filing status.
Interest does not get a preferential tax rate the way long-term capital gains or may have access to dividends do. It is treated like wages or self-employment income. This is why high-yield savings accounts, while they pay more interest than traditional accounts, also generate a larger tax liability.
If you are retired and living on savings, interest income can push you into a higher tax bracket or affect whether you have to pay tax on Social Security benefits. If you are a student claimed as a dependent, interest income counts toward your own income and can affect whether you have to file a return or whether you lose the dependent exemption.
Reporting interest on your tax return
You report interest income on Schedule B (Interest and Ordinary Dividends) if you have more than $1,500 in interest and dividends combined, or on Form 1040 directly if you have $1,500 or less. Most people with savings account interest only use Form 1040 and enter the total on the line for interest income.
If you use tax software, you enter the amount from your 1099-INT and the software places it in the correct location. If you file by hand, you write the total interest on the appropriate line of Form 1040. You do not need to list each account separately unless you are using Schedule B.
The IRS does not care which bank the interest came from or how many accounts you have. You report the total interest earned during the year. If you earned $50 at one bank and $35 at another, you report $85 total.
What happens if you do not report interest income
If you fail to report interest that the IRS knows about (because the bank reported it on a 1099-INT), the IRS will notice the discrepancy. You may receive a notice asking you to explain the difference or pay additional tax plus interest and penalties. The penalty for underreporting income is typically 20% of the underpaid tax, plus interest calculated from the original due date.
If the interest was genuinely under $10 and you did not report it, that is not a violation—the threshold exists precisely so small amounts do not require reporting. But if you earned $15 and reported nothing, the IRS will follow up.
The safest approach is to report all interest you earn, even if it is under $10. Reporting $8 in interest costs you nothing and eliminates any question about whether you met the threshold.
Interest from different account types and special situations
Interest from regular savings accounts, money market accounts, and CDs all follow the same rule: report it if it is $10 or more. Interest from a joint account is reported by the person whose Social Security number appears on the 1099-INT, which is usually the first account holder listed. If you and a spouse own a joint account, the bank typically reports all interest to one of you, and that person reports it on their return.
If you inherit a savings account and earn interest on it before the account is transferred to your name, that interest is still your income and must be reported. If you are the executor of an estate and the estate earns interest on its accounts, that interest is reported on the estate's tax return, not your personal return.
If you have a custodial account for a minor child, the interest is the child's income and must be reported on the child's tax return, not the parent's. A child with interest income may have to file their own return even if their parents claim them as a dependent.
Frequently Asked Questions
Do I have to report interest if I did not receive a 1099-INT?
Yes, if you earned $10 or more in interest, you report it even if the bank did not send a form. The $10 threshold is the rule; the 1099-INT is just documentation. Check your account statements to calculate the total interest paid during the year.
What if I earned interest in multiple states—do I report it differently?
You report all interest on your federal return the same way. Some states tax interest income and some do not. If you lived in multiple states during the year, you may have to file returns in more than one state, and each state has its own rules about what counts as income.
Can I deduct anything against interest income?
No. Interest income is reported in full. You cannot deduct the fees your bank charged or the inflation that reduced the purchasing power of your interest earnings. Interest is straightforward added to your income.
Does interest from a savings account count as earned income for the Earned Income Tax Credit?
No. Interest is unearned income. It does not count toward the earned income threshold for the EITC, and it can reduce your EITC if you have too much unearned income in a given year.
What if I moved money between accounts during the year—does that count as interest?
No. Moving money from one account to another is not income. Only the interest the bank paid you counts. If you transferred $5,000 from checking to savings, that $5,000 is not interest and is not reported as income.