You only pay tax on interest your account earns, not on the money itself
The money you deposit into a joint savings account is yours — you do not owe tax on it. What you do owe tax on is the interest the bank pays you for keeping your money there. The bank will send you a form called a 1099-INT at the end of the year listing all the interest earned in that account, and you report that amount on your federal tax return.
The key point: depositing $5,000 into a joint account creates no tax bill. If that account earns $15 in interest over the year, you owe tax on the $15 — not on the $5,000. The interest is income. The principal (the money you put in) is not.
How much tax you owe on that interest depends on your overall income and your tax bracket, which is why the bank does not withhold the tax automatically. You calculate what you owe when you file your return.
Key Takeaways
- Deposits to a joint account are not taxable — only the interest the account earns is.
- Banks report interest earnings on a 1099-INT form, which you receive by January 31 and must report on your tax return.
- If the account earns less than $10 in interest, the bank may not send a 1099-INT, but you still owe tax on that interest if you have other income.
- With a joint account, the IRS assumes all the interest belongs to whoever is listed first on the account unless you file a different statement.
- Interest rates on savings accounts are low enough that most people owe little to no tax on the interest earned.
How the IRS treats interest from a joint account
When a bank issues a 1099-INT for a joint account, it reports the interest to the IRS under the Social Security number of the first account holder listed. This means the IRS initially assumes that person earned all the interest and owes all the tax on it.
If you and the other account holder want to split the interest differently — for example, if you each own half the money — you can file Form 8082 with your tax return to report a different allocation. This is uncommon and only necessary if the split is unequal or if you want to claim a different share than what the bank reported.
Most couples and family members do not file Form 8082 because the interest earned on a savings account is small enough that the tax difference between them is minimal. If you are unsure whether you need to file it, a tax preparer or the IRS can answer that question based on your specific situation.
When you receive the 1099-INT form
The bank will mail or email you a 1099-INT by January 31 of the year after the interest was earned. If the account earned less than $10 in interest, the bank may not send a form at all — but you still owe tax on that interest if you have other income that requires you to file a return.
You will receive two copies: one to keep for your records and one to send with your tax return (or to your tax preparer if you use one). The form shows the account number, the total interest earned, and any federal tax already withheld (which is rare on savings accounts).
If you do not receive a 1099-INT by early February and you know the account earned interest, contact the bank. They may have the wrong address on file, or they may be sending it electronically to a different email.
How much tax you actually owe on the interest
The amount of tax depends on your total income for the year and which tax bracket you fall into. Someone earning $30,000 a year pays a lower percentage on interest than someone earning $150,000. The IRS publishes tax brackets each year, and a tax preparer or free tax software can calculate your exact amount.
For most people with a savings account, the interest earned is small — often $5 to $50 per year — so the tax owed is also small. A person in the 12% tax bracket who earned $20 in interest would owe about $2.40 in federal tax on that interest. State tax may explore as well, depending on where you live.
If you want to reduce the tax you owe on savings interest, the main option is to earn less interest — which means having less money in the account or moving it to a lower-interest account. Some accounts marketed as tax-advantaged (like certain retirement accounts) do exist, but a regular joint savings account is not one of them.
Withdrawals and transfers do not create a tax bill
Moving money out of the joint account — whether you withdraw it to spend, transfer it to another account, or give it to the other account holder — does not create a tax bill. You are moving your own money, not earning income.
The only exception is if you withdraw money that includes interest the account earned and you have not yet reported that interest on a tax return. In practice, this does not matter because you report the interest based on when it was earned, not when you withdraw it.
State and local taxes on savings interest
Some states tax interest income, and some do not. If you live in a state with an income tax, check your state's tax website or ask a tax preparer whether savings interest is taxable in your state. A few states exempt interest from taxation entirely, while others tax it the same way the federal government does.
Local taxes on savings interest are rare but do exist in some cities. This is less common than state tax and usually only applies if you live in a city with a local income tax.
Frequently Asked Questions
Do I have to report interest if it is less than $10?
The bank does not have to send you a 1099-INT if interest is under $10, but you still owe tax on it if you file a return. Include it on your tax return even if you do not receive a form. Keep your bank statements as proof of the amount earned.
What if the other account holder and I earned the interest differently?
If one person deposited all the money and the other deposited none, you can file Form 8082 to report the interest allocation differently than the bank did. This is optional and only necessary if the split matters for your tax situation. A tax preparer can help you decide.
Does opening a joint account change my tax filing status?
No. A joint savings account is just a bank account. It does not affect whether you file as single, married, head of household, or any other status. Your filing status is determined by your marital status and family situation, not by your bank accounts.
Can I avoid paying tax on savings interest by putting money in a joint account?
No. The type of account does not matter — interest is taxable whether the account is in your name alone, joint, or in a trust. The only way to avoid tax on interest is to earn less interest, which means having less money in savings or moving it to an account that pays no interest.
What happens if I do not report the interest on my tax return?
The IRS receives a copy of the 1099-INT from the bank. If you do not report the interest, the IRS will likely notice the discrepancy and send you a bill for the tax owed plus penalties and interest. It is simpler and cheaper to report it when you file.