Yes, you must report all savings account interest on your tax return, even small amounts
The Internal Revenue Service (IRS) requires you to report every dollar of interest your savings account earns. This is true whether the amount is $1 or $1,000. Your bank will send you a form called a 1099-INT in January or early February each year, listing the interest you earned in the previous year. You use this form to fill out your tax return.
The requirement exists because interest is income — money you received that you did not work for directly. The IRS taxes income from all sources, and savings interest counts as income. You cannot skip reporting it because the amount seems small, because you did not withdraw the money, or because you reinvested it back into the account.
There is one narrow exception: if your total interest for the year is less than $10, your bank may not send you a 1099-INT form. Even then, you are still required to report the interest if you file a tax return. However, most people with savings accounts will receive the form.
Key Takeaways
- Your bank sends you a 1099-INT form each January showing all interest earned in the previous year, and you must report this amount on your tax return.
- Interest is taxable income even if you did not withdraw it, reinvested it, or earned only a small amount.
- The 1099-INT goes on Schedule B (Interest and Ordinary Dividends) if you file a full tax return, or directly on Form 1040 if you use the simplified form.
- If you have multiple savings accounts or accounts at different banks, each institution sends its own 1099-INT, and you add all the interest together when you report.
- Failing to report interest the IRS knows about (because your bank reported it) can trigger an audit or penalty.
Where the interest goes on your tax forms
If you file the standard tax return, you report savings interest on Schedule B, which is a worksheet attached to Form 1040. Schedule B asks you to list each source of interest income separately — so if you have a savings account at two different banks, you list both. Then you add them together and put the total on your main Form 1040.
If your total interest for the year is $1,500 or less and you have no other investment income, you can report the interest directly on Form 1040 without using Schedule B. The form will tell you which box to use. Either way, the interest becomes part of your taxable income, which means it may push you into a higher tax bracket or reduce any refund you were expecting.
You do not need to attach the 1099-INT form to your return when you mail it in. Keep it with your records in case the IRS asks questions later. If you file electronically, the software will ask you to enter the information from the form, and the software handles the rest.
How the IRS knows about your interest
Your bank reports the interest to the IRS on the same 1099-INT form it sends to you. The IRS has a copy of that form before you file your return. This means if you earn interest and do not report it, the IRS will likely notice the mismatch between what your bank reported and what you claimed on your return.
The IRS does not actively audit every small interest amount, but the discrepancy creates a record. If you are audited for another reason, unreported interest can complicate your case. More importantly, if you are selected for an audit specifically about income reporting, missing interest will be flagged when ready.
Reporting the interest takes a few minutes and prevents this problem entirely. It is far simpler to report it than to deal with a notice from the IRS later.
What happens if you have interest from multiple accounts
If you have savings accounts at more than one bank, or multiple accounts at the same bank, each one may generate its own 1099-INT form. You will receive a separate form from each institution. When you file your taxes, you add all the interest together and report the total.
For example, if you have a savings account earning $200 in interest at Bank A and another earning $150 at Bank B, you report $350 total on your tax return. You list both 1099-INT forms on Schedule B (or note both amounts if you are using the simplified reporting method), and the total goes on Form 1040.
Keep all your 1099-INT forms together with your tax records. If the IRS ever asks about your interest income, you will have proof of what each account earned.
Interest from money market accounts and certificates of deposit
Savings accounts are not the only place interest is taxable. Money market accounts, certificates of deposit (CDs), and savings bonds all generate interest that must be reported the same way. Each of these will send you a 1099-INT if the interest is $10 or more.
CDs have a special rule: if you withdraw money before the CD matures, you may owe an early withdrawal penalty. That penalty reduces the interest you earned, but you still report the full interest amount on your tax return. The 1099-INT will show the interest earned, and you report a separate deduction for the penalty on Form 1040. This means the penalty reduces your taxable income even though the interest itself is fully taxable.
Savings bonds work differently — the interest is not paid out each year like a savings account. Instead, the bond increases in value, and you report the interest when you cash it in or when it matures. The 1099-INT for a savings bond will show the interest earned in that specific year, even if you have not cashed it yet.
Tax brackets and how interest affects your overall taxes
Interest income is added to your other income — wages, self-employment income, and any other sources — to calculate your total taxable income. This total determines which tax bracket you fall into, which is the percentage of tax you owe on your income.
If you earn $50,000 in wages and $500 in interest, your taxable income is $50,500. That extra $500 may push you into a higher tax bracket, meaning you owe more tax than you would have on wages alone. The exact impact depends on your total income and your filing status (single, married, head of household, and so on).
This is why some people are surprised to owe taxes when they thought they would get a refund — they forgot to account for interest income when estimating their tax bill. If you have substantial savings earning interest, it is worth factoring that into your tax planning.
Frequently Asked Questions
Do I have to report interest if I earned less than $100?
Yes. The IRS requires you to report all interest income, regardless of the amount. Your bank may not send you a 1099-INT if interest is under $10, but you are still required to report it if you file a tax return. If your bank does send a form, you must report it even if the amount is small.
What if I did not receive a 1099-INT form from my bank?
Contact your bank and ask for the form. Banks are required to send 1099-INT forms for interest of $10 or more by January 31. If you earned less than $10, the bank may not send a form, but you should still report the interest if you file a return. If the bank cannot locate the form, ask for a statement showing the interest earned during the year.
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. The interest itself is fully taxable with no deductions. The only exception is if you borrowed money to fund the savings account — in that case, you might be able to deduct the interest you paid on the loan, but this is rare and has strict rules. Talk to a tax professional if this applies to you.
What if my bank made an error on the 1099-INT?
Contact your bank when ready and ask them to issue a corrected form, called a 1099-INT Correction. Your bank will send the corrected form to you and to the IRS. Once you receive it, use the corrected amount on your tax return. If you already filed with the wrong amount, you can file an amended return using Form 1040-X.
Does interest from a joint savings account get split between owners?
The 1099-INT will show the full interest amount, and your bank will report it under one person's Social Security number (usually whoever opened the account or is listed first). You and the other account owner need to decide how to split the interest for tax purposes — typically 50/50 if you own it equally. Each person reports their share on their own tax return. This is a matter between you and the other owner; the IRS does not split it automatically.