Yes, you report savings account interest as income on your tax return

The IRS requires you to report all interest earned in a savings account, no matter how small. Your bank sends you a Form 1099-INT each January for any interest paid during the previous year. You then report that amount on your federal tax return. This applies to regular savings accounts, money market accounts, and certificates of deposit (CDs).

The threshold for receiving a 1099-INT varies by bank, but many institutions issue the form if interest exceeds $10. However, you must report all interest income even if you do not receive a form — the IRS knows about it because your bank reports it to them separately. Failing to report interest income can trigger an audit or penalty.

The interest counts as ordinary income, taxed at your regular income tax rate. If you earned $150 in savings account interest during the year, that $150 is added to your other income when calculating what you owe.

Key Takeaways

  • Banks report savings account interest to the IRS on Form 1099-INT, and you must report it on your tax return even if the amount is small.
  • You owe tax on interest income at your regular income tax rate, regardless of whether you receive a 1099-INT form.
  • The IRS receives a copy of your 1099-INT directly from the bank, so unreported interest will likely be caught during processing.
  • Interest from savings accounts, money market accounts, and CDs all follow the same reporting requirement.

How banks report interest to the IRS

Your bank generates a 1099-INT form and sends it to you and the IRS by January 31 each year. The form shows the total interest paid to your account during the previous calendar year. The IRS uses this information to cross-check your tax return — if you report income of $50,000 but the IRS sees you earned $200 in interest that you did not mention, the discrepancy flags your return.

Different banks have different thresholds for issuing the form. Some issue a 1099-INT for any interest above $1; others wait until $10 or more has accumulated. Check your bank's website or call to find out their specific threshold. Regardless of the threshold, you are legally required to report all interest, even $5 earned in a single month.

If you have multiple savings accounts at different banks, each bank sends its own 1099-INT. You add up all the interest from all forms and report the total on your return.

Where to report interest on your tax return

Interest income goes on Schedule B (Interest and Ordinary Dividends) if you file a full Form 1040. You list each source of interest and the amount, then transfer the total to the main return. If your interest income is very small — some tax software allows you to skip Schedule B if interest is under $1,500 — you may be able to report it directly on the 1040, but this depends on your filing software and situation.

If you use tax preparation software, the program typically walks you through entering the 1099-INT information. If you file by hand or with a tax preparer, bring all your 1099-INT forms with you. The preparer will enter the amounts in the correct places.

When you might not receive a 1099-INT

If your interest is below your bank's reporting threshold, you will not receive a form. However, you still owe tax on that interest. This is especially common in low-interest environments or with very small account balances. You are responsible for tracking and reporting it yourself.

Some accounts, like certain promotional savings accounts or accounts held by minors under specific conditions, may have different reporting rules. If you are unsure whether interest from a particular account should be reported, contact your bank or a tax professional. It is safer to report interest you are uncertain about than to omit it.

Interest earned by minors and dependents

If a minor has a savings account in their own name, the interest is reported on that child's tax return, not the parent's. The bank sends the 1099-INT to the child's Social Security number. The parent may still claim the child as a dependent, but the interest income belongs to the child's return.

Some parents open custodial accounts where the parent is the account owner but the child is the beneficiary. The tax treatment depends on the account structure — custodial accounts under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) typically report interest to the child's Social Security number. Confirm with your bank how interest will be reported before opening the account.

What happens if you do not report interest income

The IRS matches 1099-INT forms against tax returns automatically. If you omit interest income, the IRS will likely notice during processing. The consequences range from a straightforward correction notice requiring you to file an amended return and pay the tax owed, to penalties and interest charges if the omission appears intentional.

Penalties for underreporting income typically start at 20 percent of the underpaid tax, plus interest calculated from the original due date. If the IRS determines the underreporting was negligent or fraudulent, penalties can be higher. An amended return filed voluntarily before the IRS contacts you may reduce or eliminate penalties, depending on the circumstances.

Frequently Asked Questions

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

Yes. The $10 threshold is only when banks must issue a 1099-INT form. You are legally required to report all interest income, regardless of amount. The IRS expects you to track and report interest your bank does not formally report to them.

What if I have interest from multiple banks?

Add up the interest from all your accounts and report the total on Schedule B. Each bank sends its own 1099-INT, and you list them all. The total goes on your tax return as one line item for interest income.

Can I deduct fees my bank charged against the interest I earned?

No. You report the full interest amount on your return. Bank fees are not deductible against interest income. However, if you paid investment-related fees or advisor fees, those may be deductible under different rules — consult a tax professional about your specific situation.

Does interest from a joint account get split between owners?

The bank reports all interest to the Social Security number listed as the primary account holder on the 1099-INT. If the account is truly joint and you each own half, you and the other owner should report your respective shares on your individual returns. Keep documentation of the split in case the IRS asks.

What if my bank made an error on the 1099-INT?

Contact your bank when ready and ask them to issue a corrected form (marked as a correction). The bank will send the corrected 1099-INT to you and the IRS. Once you receive it, use the corrected amount on your tax return. If you already filed, you may need to file an amended return.