Yes, you must report savings account interest as income on your tax return
Interest your bank pays you is taxable income. The IRS treats it the same way it treats wages or other money you earn. You report it on your federal tax return every year, even if the amount is small. Your bank will send you a form called a 1099-INT (Interest Income) if you earned $10 or more in interest during the year, but you owe taxes on any interest you earned, whether or not you receive the form.
The reason is straightforward: interest is money the bank pays you for letting them use your deposits. From the government's perspective, that payment is income to you, and income is taxable. This applies to regular savings accounts, money market accounts, and certificates of deposit (CDs). High-yield savings accounts, which pay more interest, follow the same rule — the higher the rate, the more interest you'll owe tax on.
Key Takeaways
- You must report all savings account interest on your federal tax return, even amounts under $10 or if your bank does not send you a 1099-INT form.
- Your bank will mail or email you a 1099-INT form by January 31 if you earned $10 or more in interest during the year.
- Interest income is taxed at your ordinary income tax rate, which depends on your total income and filing status.
- You report interest on Schedule B (if you have other investment income) or directly on your 1040 form (if interest is your only investment income).
- Some states also tax interest income, so check your state's tax rules in addition to federal requirements.
When your bank sends you the 1099-INT form
Banks are required to send a 1099-INT form to you and to the IRS if you earned $10 or more in interest during the calendar year. The bank mails or emails this form by January 31 of the following year. For example, if you earned $12 in interest during 2024, you'll receive a 1099-INT in January 2025.
The form shows the total interest you earned at that bank. If you have accounts at multiple banks, each bank sends its own 1099-INT. You'll need to add up interest from all your accounts when you file your return. Keep all 1099-INT forms you receive — you'll need them to fill out your tax return accurately.
If you earned less than $10 in interest at a particular bank, that bank will not send you a 1099-INT. However, you still owe tax on that interest. You'll need to track it yourself and report it on your return.
How interest income is taxed
Interest is taxed as ordinary income, meaning it's taxed at the same rate as your wages or salary. The tax rate depends on your total income for the year and your filing status (single, married filing jointly, head of household, and so on). The more income you have overall, the higher your tax rate on the interest.
For example, if you're single and earn $35,000 in wages plus $200 in savings account interest, your total taxable income is $35,200. That $200 in interest is taxed at whatever rate applies to your income bracket. This is different from long-term capital gains, which have lower tax rates — interest does not get that preferential treatment.
If you're retired or have very little other income, your interest might be taxed at a lower rate or might not be taxed at all if your total income falls below the threshold where you have to file a return. The IRS publishes income thresholds each year based on age and filing status.
Where to report interest on your tax return
How you report interest depends on what other investment income you have. If you have interest from savings accounts, CDs, or bonds, and also have capital gains, dividends, or other investment income, you'll use Schedule B (Interest and Ordinary Dividends). You attach Schedule B to your Form 1040 and transfer the total to the main form.
If interest is your only investment income, you can report it directly on your Form 1040 without using Schedule B. The IRS instructions for Form 1040 will tell you which line to use. Many tax software programs will ask you questions about your income and automatically put the interest in the right place.
If you file taxes yourself using paper forms, the instructions that come with Form 1040 explain where to enter interest income. If you use tax software or a tax preparer, they'll ask you for the amounts from your 1099-INT forms and handle the placement for you.
State taxes on savings account interest
In addition to federal tax, most states also tax interest income. A few states — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not have a state income tax at all, so residents of those states only owe federal tax on interest.
States that do tax income typically tax interest the same way the federal government does: as ordinary income at your state tax rate. Some states have lower rates for retirees or people over a certain age, but those rules vary widely. You'll need to check your state's tax rules or ask a tax preparer what applies to you.
When you file your state return, you'll report interest income in a similar way to federal — usually on a state version of Schedule B or directly on the state income tax form. Your 1099-INT shows the total interest, which you use for both federal and state returns.
Interest from joint accounts and accounts for minors
If you own a savings account jointly with someone else, the interest belongs to whoever owns the account. If both people own it equally and the interest is $100, each person owes tax on $50. The bank will issue the 1099-INT to the person whose Social Security number is listed first on the account, but both owners are responsible for reporting their share.
If you have a savings account for a minor child, the interest is the child's income, not yours. The child must report it on their own tax return if the amount is large enough to require filing. However, if the child's only income is interest and it's below the filing threshold, they may not have to file. Parents sometimes use the "kiddie tax" rules to report a child's interest on the parent's return, but this only works in specific situations — consult a tax preparer if this applies to you.
What happens if you don't report interest income
The IRS receives a copy of every 1099-INT your bank sends you. If you don't report the interest on your return, the IRS will notice the discrepancy. You may receive a notice asking you to explain the difference, and you could owe back taxes plus penalties and interest on the unpaid amount.
Even if you earned less than $10 and received no 1099-INT, you're still required to report it. The IRS expects you to keep track of all income. If you're audited and the IRS finds unreported interest, the consequences are the same: back taxes, penalties, and interest charges.
Frequently Asked Questions
Do I have to file a tax return if my only income is $50 in savings account interest?
It depends on your age and filing status. The IRS sets income thresholds each year — for 2024, a single person under 65 with only interest income doesn't have to file unless their income exceeds $14,600. Check the IRS website or ask a tax preparer what the threshold is for your situation, because it changes yearly.
What if I earned interest at two different banks?
Each bank sends its own 1099-INT. You'll receive multiple forms — one from each bank. Add up all the interest from all your 1099-INT forms and report the total on your tax return. If you earned less than $10 at one bank, that bank won't send a form, but you still need to include that interest in your total.
Is interest from a high-yield savings account taxed differently?
No. High-yield savings accounts pay more interest, so you'll owe more tax, but the interest is taxed the same way as interest from a regular savings account — as ordinary income at your tax rate. The higher the rate your bank pays, the more you'll owe in taxes.
Can I deduct any expenses related to my savings account?
Generally, no. You cannot deduct fees your bank charges or costs of maintaining the account. Interest income is reported as-is without deductions. The only exception is if you borrowed money to fund the account, you might be able to deduct interest on that loan, but this is rare and has strict rules — consult a tax preparer if this applies.
What if my bank made a mistake on the 1099-INT amount?
Contact your bank and ask them to issue a corrected form. Banks can send amended 1099-INT forms (marked as corrections) to you and the IRS. If you've already filed your return and the bank later corrects the amount, you may need to file an amended return. Keep records of your account statements so you can verify the interest amount yourself.