Yes, you must report all savings account interest as income on your federal tax return
The IRS treats interest earned in a savings account the same way it treats wages or other income. If your bank paid you interest during the year, that money counts as taxable income, and you are required to report it. Your bank will send you a Form 1099-INT in January or early February showing how much interest you earned. You use that form to fill out your tax return.
The threshold for reporting is low. If you earned $10 or more in interest during the year, your bank must send you a 1099-INT. Even if you earned less than $10, you still owe tax on it—you just won't receive the form. The IRS expects you to report all interest income, regardless of the amount.
This applies to all types of savings accounts: regular savings accounts, money market accounts, certificates of deposit (CDs), and high-yield savings accounts. The interest rate does not matter. Whether your account earned 0.01% or 5%, the interest is taxable.
Key Takeaways
- Your bank sends you a Form 1099-INT if you earned $10 or more in interest during the tax year, and you must report that amount on your federal tax return.
- Interest income is taxed as ordinary income at your regular tax rate, not at a special lower rate.
- You report savings account interest on Schedule 1 (Form 1040) or Schedule B (Form 1040) if you have more than $1,500 in interest income.
- If you earned less than $10 in interest, your bank will not send a 1099-INT, but you still owe tax on that interest if you file a return.
How the IRS taxes interest income
Interest from a savings account is taxed as ordinary income, which means it is added to your wages, self-employment income, and other earnings and taxed at your regular tax bracket. If you earn $50,000 in wages and $500 in savings account interest, the IRS treats you as having $50,500 in taxable income.
The tax you owe depends on your total income and your filing status. Someone in the 12% tax bracket pays 12% on the interest. Someone in the 22% bracket pays 22%. There is no special lower rate for interest income from savings accounts, unlike some types of investment income.
If you are married filing jointly and your combined interest income from all sources exceeds $1,500, you must file Schedule B with your Form 1040 instead of just listing the interest on the main form. If your interest is $1,500 or less, you can report it directly on Schedule 1.
When your bank sends you the 1099-INT form
Banks mail 1099-INT forms by January 31 each year. The form shows the interest you earned during the previous calendar year (January 1 through December 31). You will receive one copy to file with your tax return and one copy for your records.
If you had multiple savings accounts at the same bank, the interest from all of them may be combined on a single 1099-INT. If you banked at different institutions, you will receive a separate 1099-INT from each one. Make sure you receive a form from every bank where you held an account that year.
If you do not receive a 1099-INT by early February, contact your bank. They may have sent it to an old address, or there may be a processing delay. You are still responsible for reporting the interest even if the form does not arrive.
What happens if you do not report the interest
The IRS receives a copy of every 1099-INT that your bank sends you. If you do not report the interest on your tax return, the IRS will notice the discrepancy. This can trigger a notice asking you to explain the missing income, or the IRS may straightforward assess the tax you owe plus penalties and interest.
The penalty for not reporting income is typically 20% of the unpaid tax, though it can be higher if the IRS determines the omission was intentional. Interest accrues on the unpaid tax from the original due date of your return. Even a small amount of unreported interest can result in a letter from the IRS that requires time and effort to resolve.
If you made an honest mistake and catch it before the IRS does, you can file an amended return using Form 1040-X. This is simpler and cheaper than dealing with an IRS notice.
Interest income below the filing threshold
If your only income is interest and it is below the standard deduction for your filing status, you may not be required to file a tax return at all. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your interest income is below that amount and you have no other income, you do not have to file.
However, if you have wages or other income that pushes your total above the standard deduction, you must file and report the interest. The interest itself does not have to reach the standard deduction threshold—your total income does.
Even if you are not required to file, you may want to file anyway if you had taxes withheld from your paychecks. Filing allows you to claim a refund of that withheld amount.
Interest from joint accounts and accounts held by minors
If you own a savings account jointly with someone else, each owner reports their share of the interest. The 1099-INT will show the total interest earned, and you will need to determine how much belongs to you based on your ownership stake. Discuss this with the other account holder and your tax preparer if you are unsure.
If a parent or guardian opens a savings account for a minor child, the interest is the child's income, not the parent's. The child must report it on their own tax return if they file one. Parents cannot claim their child's interest income on their own return. A child with interest income may need to file a return even if they have no wages.
Some parents use the Kiddie Tax rules to shift investment income to a child in a lower tax bracket, but this applies mainly to investment income, not savings account interest. Consult a tax professional if you have questions about a child's interest income.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
Yes. Your bank only sends a 1099-INT if you earned $10 or more, but you still owe tax on any interest you earned, even $1 or $5. You report it on your return based on your own records or a statement from your bank.
What if I earned interest at multiple banks?
You will receive a separate 1099-INT from each bank. Add up all the interest from all the forms and report the total on your tax return. If your combined interest exceeds $1,500, you must file Schedule B.
Can I deduct savings account fees from the interest I report?
No. You report the gross interest your bank paid you, not the net amount after fees. Savings account fees are not deductible on your personal tax return.
What if my bank made a mistake on the 1099-INT?
Contact your bank and ask them to issue a corrected form (a 1099-INT marked "Corrected"). Once you receive it, file an amended return using Form 1040-X with the correct amount. Attach a copy of the corrected 1099-INT to your amended return.
Does interest from a high-yield savings account get taxed differently?
No. High-yield savings accounts earn more interest, but the interest is still ordinary income taxed at your regular rate. You report it the same way as interest from any other savings account.