Yes, you report savings interest as income, but only if it reaches a threshold
The IRS requires you to report interest earned on savings accounts as taxable income on your federal tax return. However, you do not have to report it if the total interest you earned across all accounts during the year was less than $10. That $10 threshold is the key number that determines whether the IRS expects to see it on your return.
Your bank will send you a Form 1099-INT in January or early February if you earned $10 or more in interest during the previous year. This form lists every account at that bank where you earned interest. If you earned less than $10 at a particular bank, they will not send you a form for that account — but you still owe tax on the interest if your total across all banks reaches $10.
The IRS receives a copy of every 1099-INT your banks send, so they know what interest income you reported. If you do not report interest that appears on a form sent to the IRS, the mismatch will likely trigger a notice.
Key Takeaways
- You must report all savings interest as income on your tax return if your total interest across all accounts was $10 or more in the year.
- Banks send Form 1099-INT only when interest reaches $10 at that specific bank, but you report the total from all banks combined.
- The IRS receives copies of all 1099-INT forms, so unreported interest that appears on a form will likely be noticed.
- Interest under $10 total for the year does not have to be reported, and no form will be sent to you or the IRS.
- You report the interest amount on Schedule 1 (Form 1040) or on your tax software's interest income section.
How the $10 threshold works across multiple banks
The $10 rule applies to your total interest income for the year, not to each individual account or bank. If you have savings accounts at three different banks and earn $3 at Bank A, $4 at Bank B, and $5 at Bank C, your total is $12 — you must report it even though no single bank will send you a 1099-INT.
This is where many people make mistakes. You might receive no forms at all because each bank stayed under $10, but you still owe tax on the combined $12. You have to add it up yourself and report it on your return. The IRS does not send you a reminder for interest below $10 at each bank, so the burden is on you to track it.
If you have joint accounts with a spouse, each of you reports your own share of the interest. The bank will split the 1099-INT between you if you provide your tax identification numbers, or you can divide it based on your ownership share when you file.
What happens if you receive a 1099-INT
When your bank sends you a 1099-INT, it will show the total interest earned at that bank during the year. You receive Copy B (the one addressed to you), and the IRS receives Copy A. The form includes your name, Social Security number, and the bank's identification number, so the IRS can match it to your return.
You must report the amount shown on the 1099-INT on your tax return, even if you think the amount is wrong. If the bank made an error, you can contact them to request a corrected form (Form 1099-INT with "CORRECTED" printed on it), which they will send to you and the IRS. Do not ignore a 1099-INT and report a different number — that creates a mismatch the IRS will catch.
Some banks issue 1099-INTs in early February, while others wait until late January. If you file your taxes before receiving all your forms, you can file an amended return once you have them, or you can request an extension to give yourself more time to gather documents.
Where to report interest income on your tax return
On Form 1040 (the main federal income tax form), interest income goes on Schedule 1, Part I, Line 8. You list the total interest from all sources — savings accounts, money market accounts, CDs, bonds, and any other interest-bearing accounts. If you use tax software, it will ask you for this information and place it in the correct location automatically.
If you have multiple 1099-INT forms, you add up all the amounts and report the total on that one line. You do not list each form separately on the return itself, though you should keep the forms with your tax records in case the IRS asks questions later.
Interest income is taxed as ordinary income at your regular tax rate, not at a special rate. A person in the 22% tax bracket who earns $500 in interest will owe approximately $110 in federal tax on that interest (before considering any deductions or credits that might reduce their overall tax bill).
Interest you do not have to report
Certain types of interest are exempt from federal income tax and do not have to be reported. The most common are interest from municipal bonds (bonds issued by states, cities, or other local governments) and interest from U.S. savings bonds if you use the proceeds for education expenses. If a 1099-INT shows tax-exempt interest, you do not report it on your income tax return, though some states may still tax it.
Interest earned in a traditional IRA or 401(k) is not reported on your tax return in the year it is earned — it grows tax-deferred inside the account. You only report it as income when you withdraw money from the account in retirement.
Interest earned in a Roth IRA is never reported as income, even when you withdraw it, as long as you follow the withdrawal rules. This is one of the tax advantages of a Roth account.
What to do if you earned less than $10 in interest
If your total interest for the year was less than $10, you do not have to report it on your tax return. No bank will send you a 1099-INT, and the IRS does not expect to see it. You can straightforward leave it off your return.
However, if you want to report it anyway, you can — it will not hurt, and some people do this to keep their records complete. The IRS will not penalize you for reporting interest that was below the threshold. The only risk is if you report a different amount than what appears on a 1099-INT that was sent to the IRS, which would create a mismatch.
Frequently Asked Questions
Do I have to report interest if I closed the account during the year?
Yes. You report all interest earned during the year, regardless of when you closed the account. The bank will send a 1099-INT for the interest earned up to the closing date if the total reached $10.
What if the 1099-INT shows the wrong amount?
Contact your bank when ready and ask them to issue a corrected 1099-INT. They will send the corrected form to you and the IRS. Do not report a different amount on your return without the corrected form in hand — the IRS will see the mismatch.
Can I deduct interest I paid on a loan from my interest income?
No. Interest you earn (reported on 1099-INT) and interest you pay on a loan are separate items. Interest paid on a mortgage or student loan may be deductible under certain conditions, but it does not offset interest income you report.
Do I report interest from a joint account differently?
If the account is jointly owned with your spouse, the bank will split the 1099-INT between you based on your tax IDs. If it is jointly owned with someone else, you each report your share of the interest based on your ownership percentage.
What if I earned interest in a foreign bank account?
You must report interest from foreign accounts the same way as domestic accounts. If the foreign bank does not send a 1099-INT, you still report the interest on your return. You may also have additional filing requirements if the foreign account balance exceeded certain thresholds — consult a tax professional for guidance.