You must report savings account interest on your federal tax return if you earned more than $5 in interest during the year
The IRS requires you to report interest income from savings accounts, money market accounts, and certificates of deposit (CDs) on your tax return. The threshold is $5 or more in a single tax year. Your bank will send you a Form 1099-INT by January 31 showing the interest you earned, and the IRS receives a copy of that same form. If you don't report it and the IRS sees the 1099-INT, you will face penalties and interest on the unpaid tax.
The actual tax you owe on that interest depends on your total income and your tax bracket. Interest is taxed as ordinary income, which means it is taxed at the same rate as wages or salary. A person earning $50,000 a year and $200 in savings account interest will owe tax on that $200 at their marginal rate. Someone earning $150,000 will owe tax at a higher rate on the same $200.
If you earned less than $5 in interest, you do not have to report it. Your bank still may send you a 1099-INT showing $0 or a very small amount, but you can disregard it for tax purposes. However, if you earned $5 or more across multiple accounts at different banks, you must add all of it together and report the total.
Key Takeaways
- Report all savings account interest of $5 or more on your federal tax return, even if no tax is owed.
- Your bank sends you a Form 1099-INT by January 31, and the IRS receives a copy, so unreported interest will be flagged.
- Interest is taxed as ordinary income at your marginal tax rate, not at a flat rate.
- Interest from multiple accounts at different banks must be combined and reported as one total.
- If you earned less than $5 total across all savings accounts, you do not have to report it.
How the IRS knows about your savings account interest
Banks are required to report interest paid to depositors using Form 1099-INT. Your bank generates this form in January for the previous calendar year and mails it to you and files it electronically with the IRS. The form shows your name, Social Security number, the account number, and the exact amount of interest paid.
The IRS matches 1099-INT forms to your tax return using your Social Security number. If you report $150 in interest on your return but the bank reported $200, the IRS will notice the discrepancy. If you report nothing but the bank reported $200, that also triggers a mismatch. The IRS does not always pursue small discrepancies when ready, but it can, and penalties compound over time.
When you might owe no tax despite reporting interest
You must report interest income even if your total tax liability is zero. This happens when your interest income plus other income falls below the standard deduction for your filing status and age. For 2024, the standard deduction is $14,600 for a single person under 65 and $29,200 for a married couple filing jointly under 65. If your total income is below these amounts, you owe no federal income tax, but you still report the interest on your return.
Some people file a return specifically to claim refundable tax credits, such as the Earned Income Tax Credit (EITC). In those cases, reporting interest income is required even though no tax is owed on it. The interest is part of your total income calculation, which affects whether you remain within the income limits for the credit.
Interest from joint accounts and accounts held by minors
If you hold a savings account jointly with another person, the interest belongs to whoever owns the account according to the account agreement and state law. Usually, joint account interest is split equally between the owners unless the account agreement specifies otherwise. Each owner reports their share on their own tax return. The 1099-INT will show the full amount of interest, and you will need to report only your portion.
If you opened 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 it exceeds $5. A child with no other income and less than $14,600 in interest (for 2024) owes no tax, but the interest must still be reported. Some parents use a custodial account or Uniform Transfers to Minors Act (UTMA) account to manage this, but the reporting obligation remains with the child.
State and local taxes on savings account interest
Most states tax interest income the same way the federal government does. You report it on your state tax return if your state has an income tax. A few states—including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—do not have a state income tax, so you report interest only to the federal IRS.
Some states offer tax breaks for interest earned in certain accounts. For example, a few states exempt interest from accounts held for education savings (such as 529 plans) from state tax. Check your state's tax authority website or speak with a tax preparer to understand your state's rules, because they vary widely.
How to report interest on your tax return
If you file Form 1040 (the standard individual income tax return), you report interest income on Schedule 1, Part I, line 8. You list the total interest from all sources—savings accounts, CDs, money market accounts, bonds, and any other interest-bearing accounts. You do not need to list each account separately unless you earned more than $1,500 in interest, in which case you must also complete Schedule B (Interest and Ordinary Dividends).
If you use tax software, it will prompt you to enter your interest income and will place it in the correct location on your return automatically. If you file by hand or with a tax preparer, provide them with your 1099-INT forms and any other documentation of interest earned. Keep copies of all 1099-INT forms for your records for at least three years.
What happens if you do not report savings account interest
If you fail to report interest income that the IRS knows about (because the bank reported it), the IRS will send you a notice of underreported income. You will owe the unpaid tax plus interest on that tax, calculated from the original due date of the return. You may also owe a penalty for accuracy-related issues, which is typically 20 percent of the underpaid tax.
The IRS does not always catch small amounts of unreported interest when ready, but the statute of limitations for the IRS to assess tax is generally three years from the date you file (or the due date, whichever is later). If you discover you missed reporting interest from a prior year, you can file an amended return (Form 1040-X) for that year. Filing an amended return voluntarily is better than waiting for the IRS to contact you, because it may reduce or eliminate penalties.
Frequently Asked Questions
Do I have to report interest if my bank did not send me a 1099-INT?
Yes. If you earned $5 or more in interest, you must report it even if your bank did not send a 1099-INT. Banks are required to send 1099-INT forms, but errors happen. Check your account statements to confirm the interest earned and report it on your return. The IRS may have received a 1099-INT from the bank even if you did not.
What if I have interest from a savings account at a bank that failed?
You still report the interest on your tax return for the year it was earned. If the bank failed before sending you a 1099-INT, contact the FDIC (Federal Deposit Insurance Corporation) or the successor bank that took over the account. They can provide documentation of the interest paid. Report the interest based on your account statements if necessary.
Can I deduct savings account fees against the interest I earned?
No. You report the gross interest earned, not the net amount after fees. Savings account fees are not deductible on your personal tax return. You report the full amount shown on the 1099-INT, which is the interest before any fees were subtracted by the bank.
Do I report interest from a high-yield savings account differently?
No. Interest from a high-yield savings account is reported the same way as interest from a regular savings account. It is ordinary interest income and goes on Schedule 1, line 8 of your Form 1040. The rate does not matter—only the total amount earned.
What if I earned interest but closed the account before the end of the year?
You still report the interest for the year it was earned. The bank will send you a 1099-INT showing the interest paid through the date the account was closed. Report that amount on your tax return for that year, regardless of when you closed the account.