You report savings account interest as income on your tax return, using the 1099-INT form your bank sends you

Every dollar your savings account earns in interest counts as income to the IRS, just like wages do. Your bank will send you a Form 1099-INT each January showing how much interest you earned the previous year. You then report that amount on your tax return. The process is straightforward: the bank does the tracking, you report the number, and the IRS matches it to make sure you did.

The only exception is if your interest was very small. Banks are not required to send you a 1099-INT if you earned less than $10 in interest during the year, though some banks send one anyway. Even if you do not receive the form, you still owe tax on the interest — the $10 threshold is just when the bank must report it to the IRS, not when you must pay tax on it.

Key Takeaways

  • Your bank sends Form 1099-INT in January showing all interest earned in the previous calendar year, and you report that amount on your tax return.
  • Interest under $10 may not trigger a 1099-INT, but you still owe tax on it if you earned it.
  • You report the interest on Schedule 1 (Form 1040) or Schedule B if you have more than $1,500 in interest income from all sources combined.
  • The interest is taxed at your ordinary income tax rate, the same rate as your salary or wages.
  • If you earned interest in a joint account, the bank reports the full amount to the IRS, and you and the account holder must split the income on your separate returns.

When your bank sends the 1099-INT and what it shows

Banks mail Form 1099-INT by January 31 each year for interest earned during the previous calendar year. The form shows your name, Social Security number, the bank's name and tax ID, and the total interest you earned. If you have multiple savings accounts at the same bank, the interest from all of them is combined on one form. If you bank at different institutions, you will receive a separate 1099-INT from each one.

You should receive the form in the mail, though many banks now offer electronic delivery through their online banking portal. If you do not receive a 1099-INT by early February and you earned interest, contact your bank and ask them to send it or provide the amount. You will need this number to file your return accurately.

Where to report the interest on your tax return

The location on your return depends on how much total interest you earned from all sources in the year. If your interest from savings accounts, money market accounts, CDs, and any other interest-bearing accounts totals $1,500 or less, you report it on Schedule 1 (which attaches to Form 1040). You straightforward enter the total amount in the "Interest" line.

If your total interest exceeds $1,500, you must use Schedule B instead, which requires you to list each account separately. Schedule B also asks whether you received a 1099-INT and whether you are reporting the same amount shown on the form. This schedule is more detailed but follows the same basic principle: you are telling the IRS where the interest came from and confirming the amounts match what the banks reported.

How interest income is taxed

Savings account interest is taxed as ordinary income, meaning it is added to your wages, salary, and other income and taxed at whatever rate applies to your total earnings for the year. If you earn $50,000 in salary and $500 in interest, the IRS treats it as $50,500 in income. The interest does not get a special lower rate — it is straightforward income.

This is different from some other types of investment income, like long-term capital gains, which may have lower tax rates. Interest is always taxed at your ordinary rate, no matter how much you earn or what type of account holds the money.

Joint accounts and who reports the interest

If you own a savings account jointly with another person, the bank reports the full interest amount on a 1099-INT to the IRS. The form shows one Social Security number — usually the account holder listed first on the account. This creates a problem: the IRS sees the full interest reported to one person, but you may have agreed to split it.

You and the other account holder must work this out between yourselves and report your share on your individual tax returns. If you own the account 50-50 and earned $200 in interest, you each report $100 on your own return. The person whose Social Security number appears on the 1099-INT may need to file an amended return if they reported the full amount. Some couples handle this by having one person report the full amount and the other report a negative amount (a correction), or by both reporting their agreed share and keeping documentation of the split in case the IRS asks.

What happens if you do not report the interest

The IRS receives a copy of every 1099-INT your bank sends you. If you do not report the interest on your return, the IRS will notice the mismatch between what the bank reported and what you reported. This can trigger a notice asking you to explain the difference or pay additional tax plus penalties and interest.

Even small amounts matter. If you earned $50 in interest and forgot to report it, the IRS will likely catch it. The penalty for underreporting income is usually 20% of the unpaid tax, plus interest calculated from the original due date. It is far simpler to report the interest when you file than to deal with a notice later.

Interest from CDs, money market accounts, and other savings products

The same reporting rules explore to interest from certificates of deposit (CDs), money market savings accounts, and any other account where the bank pays you interest. Each institution sends its own 1099-INT, and you combine all the interest on your tax return. If you have a CD that matured and paid a lump sum of interest, that interest appears on a 1099-INT just like regular savings account interest.

One exception: if you withdraw money from a CD before maturity, you may owe an early withdrawal penalty. That penalty is not reported on the 1099-INT. Instead, you report it separately as a deduction on Schedule 1. The bank will send you a 1099-INT showing the gross interest earned, and you subtract the penalty on your return.

Frequently Asked Questions

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

Yes. The $10 threshold only means your bank does not have to send you a 1099-INT. You still owe tax on any interest you earned, even $1. If you did not receive a form, you can find the interest amount in your account statements or by asking your bank.

What if the 1099-INT shows the wrong amount?

Contact your bank when ready and ask them to issue a corrected form (called an amended 1099-INT). If the bank corrected it before January 31, they will send the corrected version. If they corrected it after you filed, you may need to file an amended return. Keep documentation of the correction in case the IRS asks.

Can I deduct any expenses related to my savings account?

No. Interest income is reported in full, and there are no deductions tied to it. You cannot deduct account fees, the cost of a safe deposit box, or any other expense as an offset to savings interest.

If I move money between my own accounts, is that interest income?

No. Moving money from one of your accounts to another is not income. Only the interest the bank pays you counts. If you transfer $5,000 from checking to savings, that $5,000 is not income — but any interest the savings account earns on that $5,000 is.

What if I opened a savings account late in the year and earned very little interest?

Report whatever interest you earned, no matter how small or when you opened the account. If you earned $2 in interest in December, that $2 is income and should be reported on your return.