Yes, you must report all interest income, even small amounts

The IRS requires you to report every dollar of interest your savings account earns, with no minimum threshold. If your bank paid you $1 in interest, that $1 is taxable income. If you earned $50, you report $50. There is no "it's too small to matter" exception.

Your bank will send you a form called a 1099-INT (Interest Income) if you earned $10 or more in interest during the year. If you earned less than $10, your bank may not send the form, but you still owe taxes on that interest. The IRS knows about your interest income because your bank reports it to them as well.

The reason is straightforward: interest is income. When a bank pays you for letting them use your money, that payment counts as earnings, just like wages or freelance work. The tax code treats it the same way.

Key Takeaways

  • You must report all interest income on your tax return, regardless of the amount, even if your bank does not send you a 1099-INT form.
  • Banks report interest of $10 or more to the IRS on a 1099-INT, which they mail to you and file with the government.
  • Interest income is added to your other income and taxed at your regular income tax rate, not at a special rate.
  • If you have multiple savings accounts or CDs, you add up all the interest from all accounts and report the total.

How the 1099-INT form works

In January or early February, your bank will mail you a 1099-INT if you earned $10 or more in interest during the previous year. The form shows the total interest paid to you in Box 1. You will receive one copy to keep for your records and another copy that the bank files with the IRS.

The form includes your name, address, and Social Security number, as well as the bank's name and ID number. This allows the IRS to match the interest income reported by the bank with what you report on your tax return. If the numbers do not match, the IRS will notice.

If you earned less than $10 in interest, your bank will not send a 1099-INT. You will not receive a form in the mail. However, you still owe taxes on that interest and must report it on your return.

What to do if you earned less than $10 in interest

When you file your tax return, you will report interest income on Schedule B (Interest and Ordinary Dividends) if you have more than $1,500 in interest and dividend income combined. If you have $1,500 or less, you can report the interest directly on your Form 1040 without using Schedule B.

Keep your bank statements from throughout the year. They show how much interest you earned each month. Add up all the interest from all your accounts—savings accounts, money market accounts, CDs, and any other interest-bearing accounts—and report the total.

If you lost your bank statements, contact your bank and ask for a year-end summary or a duplicate 1099-INT. Banks keep records and can provide this information even if they did not send the original form.

How interest income affects your taxes

Interest income is taxed as ordinary income, meaning it is added to your wages, self-employment income, and other earnings. It is not taxed at a special lower rate. If you earned $40,000 in wages and $500 in interest, your taxable income is $40,500.

The tax you owe on the interest depends on your total income and your tax bracket. Someone in the 12% tax bracket will owe roughly 12 cents per dollar of interest. Someone in the 22% bracket will owe roughly 22 cents per dollar. The exact amount depends on your full tax situation.

If you are retired and living on interest and investment income, you may owe taxes even if you have no wages. If you are a student with a part-time job and some savings interest, the interest is still taxable income that counts toward your total.

Multiple accounts and joint accounts

If you have interest in more than one savings account—at the same bank or different banks—you add up all the interest and report the total. Each bank sends its own 1099-INT, and you report each one. The IRS will see all of them.

If you have a joint savings account with a spouse, parent, or another person, the interest belongs to whoever owns the account according to the account agreement. Usually both owners are listed on the 1099-INT. Check with your bank about how they report joint account interest, because you may need to split the reported amount with the other owner on your tax return.

If you are a minor with a savings account in your name, your parent or guardian may need to report the interest on their return, depending on your income level and whether you file your own return. This is a situation to discuss with a tax preparer.

What happens if you do not report interest income

The IRS receives a copy of every 1099-INT that your bank files. Their computers match the forms to the tax returns they receive. If your return shows no interest income but the bank reported interest in your name, the IRS will notice the mismatch.

The IRS may send you a notice asking why the amounts do not match. You may owe back taxes, plus interest on the unpaid amount, plus penalties. The penalty for not reporting income is usually 20% of the unpaid tax, though it can be higher if the IRS determines the omission was intentional.

Reporting the interest, even if it is a small amount, takes a few minutes and costs nothing. Not reporting it creates a paper trail that leads back to you.

Frequently Asked Questions

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

Yes. The $10 threshold only determines whether your bank sends you a 1099-INT form. You must report all interest income on your tax return, no matter how small. Keep your bank statements to prove the amount if the IRS asks.

What if I have interest from a CD that matured during the year?

Interest from a CD is reported the same way as savings account interest. Your bank will send a 1099-INT if the total interest was $10 or more. If the CD matured and you withdrew the money, you still report the interest earned while the CD was open.

Can I deduct any expenses against my interest income?

Generally, no. Interest income is reported as-is. You cannot deduct fees your bank charged or the cost of maintaining the account. However, if you borrowed money to fund the savings account (which is unusual), you might be able to deduct the interest you paid on the loan—but this is a complex situation best discussed with a tax preparer.

What if my bank made a mistake on the 1099-INT?

Contact your bank when ready and ask them to issue a corrected form, called an amended 1099-INT. They will send you a corrected copy and file a corrected copy with the IRS. Do not file your tax return until you have the corrected form, or report the correct amount and keep documentation of the bank's error.

Do I report interest from a savings account in a different country?

Yes. The IRS taxes U.S. citizens and residents on worldwide income, including interest from foreign bank accounts. You must report it on your U.S. tax return. There are additional reporting requirements for foreign accounts above certain thresholds, which you should discuss with a tax professional.