Yes, you must report all interest income, even from savings accounts

The IRS requires you to report interest earned on a savings account as taxable income on your federal tax return, with very few exceptions. This applies whether the interest is $1 or $1,000. The bank or credit union will send you a Form 1099-INT in January showing how much interest you earned during the previous year, and you report that amount on your tax return.

The only real exception is if your total interest income for the year is less than $10 — in that case, the bank may not send you a 1099-INT, and you still report what you earned. The threshold for filing a return at all is different and depends on your age and filing status, so earning $5 in interest does not automatically mean you have to file a return overall, but if you do file, that $5 goes on the return.

This rule covers savings accounts, money market accounts, certificates of deposit (CDs), and any other account where a bank or credit union pays you interest. It does not matter whether you earned the interest in a regular account, a high-yield savings account, or an account at an online bank.

Key Takeaways

  • The IRS requires you to report all interest income on your tax return, regardless of the amount, unless your total interest for the year is under $10.
  • Banks and credit unions send Form 1099-INT in January if you earned $10 or more in interest during the previous year.
  • You report the interest amount from your 1099-INT on Schedule 1 (Form 1040) or on your tax software's interest income section.
  • Interest income is taxed at your ordinary income tax rate, not at a special capital gains rate.
  • If you do not receive a 1099-INT but earned interest, you still report it using the amount shown in your account statements or online banking records.

How the IRS knows about your interest income

Banks and credit unions are required to report interest payments to the IRS on Form 1099-INT. They send a copy to you and file a copy with the IRS. The IRS then cross-checks what you report on your tax return against what the bank reported. If you report less interest than the bank reported, or if you do not report it at all, the IRS will notice the discrepancy.

This matching system is automated and happens for most taxpayers. The IRS does not always pursue small mismatches when ready, but the risk increases if the amount is significant or if you have a pattern of underreporting. Correcting the error on an amended return (Form 1040-X) is simpler and cheaper than dealing with an IRS notice later.

Where you report interest income on your tax return

If you file Form 1040 (the standard federal income tax return), you report interest income on Schedule 1, Part I, Line 8a. You then transfer the total to your Form 1040. If you use tax software, it will ask you about interest income and place it in the correct location automatically.

The form asks for the total of all interest you earned during the year. You do not need to list each account separately — just add up all the 1099-INT forms you received and any interest that was not reported on a 1099-INT. If you earned interest in multiple accounts, combine them into one number.

What happens if you earned less than $10 in interest

If your total interest income for the year is under $10, the bank is not required to send you a 1099-INT. However, you still owe tax on that interest if you are required to file a return for other reasons. You report it using your account statements or the interest shown in your online banking records.

Whether you are required to file a return at all depends on your income from all sources, your age, and your filing status — not on whether you received a 1099-INT. A tax professional or the IRS website can tell you whether your specific situation requires a return. If you do file, the interest goes on the return even if no 1099-INT was issued.

Interest income from joint accounts and accounts held by minors

If you own a savings account jointly with another person, the bank reports the full interest amount on a 1099-INT to whichever person's Social Security number is listed first on the account. That person is responsible for reporting it, but the two account owners should agree on how to split the income for tax purposes. If you split it differently than the 1099-INT shows, you may want to file Form 8949 or attach a note to your return explaining the split.

If a parent or guardian opens a savings account for a minor child, the interest is the child's income, not the parent's. The bank will issue a 1099-INT in the child's name. The child must report it on their own return if they are required to file. A parent cannot claim the interest as their own income just because they control the account.

How interest income affects your tax bracket and other benefits

Interest income is taxed at your ordinary income tax rate — the same rate as wages or salary. It is not taxed at the lower capital gains rate. This means $1,000 in interest income could push you into a higher tax bracket, depending on your total income for the year.

Interest income can also affect your may be able to access for certain tax credits and deductions. For example, if you are close to the income limit for the Earned Income Tax Credit (EITC) or the Child Tax Credit, additional interest income could reduce or eliminate those credits. Some retirement account contributions are also limited based on income, so interest earned outside a retirement account can affect how much you can contribute to an IRA or other account.

Interest earned in retirement accounts does not need to be reported separately

Interest earned inside a traditional IRA, Roth IRA, 401(k), or other may have access to retirement account is not reported on your tax return as interest income. The account grows tax-deferred (or tax-free in the case of a Roth), and you only report income when you withdraw money from the account. This is one of the main tax advantages of saving in a retirement account rather than a regular savings account.

If you have both a regular savings account and a retirement account, you report interest from the regular account but not from the retirement account. The bank will send you a 1099-INT only for the regular account.

Frequently Asked Questions

What if I earned interest but did not receive a 1099-INT?

Contact your bank and ask them to send it. If the interest was under $10, they may not be required to send one, but you can request it. If you still do not receive it, use your account statements to find the interest amount and report it on your return anyway. The IRS expects you to report all interest, whether or not you have a 1099-INT.

Do I have to report interest from a savings account at a bank outside the United States?

Yes. You must report all interest income earned anywhere in the world on your U.S. tax return. If the foreign bank does not send a 1099-INT, use your statements to calculate the interest and report it. You may also have additional reporting requirements under the Foreign Bank Account Report (FBAR) rules if your foreign accounts exceed certain thresholds.

Can I deduct the taxes I pay on interest income?

No. Interest income is reported as gross income, and you pay tax on the full amount. You cannot deduct the tax itself. However, if you paid estimated taxes or had taxes withheld from other income, those payments reduce your overall tax bill.

What if the 1099-INT shows the wrong amount?

Contact your bank when ready and ask them to issue a corrected 1099-INT (marked as a correction). The bank will file the corrected version with the IRS and send you a copy. Report the corrected amount on your tax return. If you already filed your return with the wrong amount, you can file an amended return (Form 1040-X) once you receive the corrected 1099-INT.

Does interest from a high-yield savings account get reported differently?

No. High-yield savings accounts are treated the same as regular savings accounts for tax purposes. The bank sends a 1099-INT, and you report the interest on your return the same way. The only difference is that high-yield accounts pay more interest, so you will owe tax on a larger amount.