Yes, you must report all savings account interest on your tax return, 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 interest during the tax year, that income belongs on your federal tax return. The bank will send you a Form 1099-INT in January showing what you earned, and the IRS receives a copy of that same form. Reporting the interest yourself prevents a mismatch between what you report and what the IRS already knows about you.

This applies to all types of savings accounts: regular savings, money market accounts, certificates of deposit (CDs), and high-yield savings accounts. It does not matter whether the interest is $1 or $1,000—the reporting requirement is the same.

Key Takeaways

  • The IRS requires you to report all savings account interest on your tax return, regardless of the amount.
  • Your bank sends you Form 1099-INT by January 31 if you earned $10 or more in interest during the year.
  • You report the interest on Form 1040 (your main tax form) or Schedule B if you have multiple accounts or other interest income.
  • If you earned less than $10, the bank may not send a form, but you still must report the interest if you received it.
  • Failing to report interest can trigger an IRS notice and result in penalties and interest charges on the unpaid tax.

How the IRS knows about your interest income

Banks and financial institutions are required by law to report interest payments to the IRS. When your savings account earns interest, the bank files Form 1099-INT with the IRS showing your name, Social Security number, and the amount paid. The IRS then matches this information against your tax return.

If you do not report the interest on your return, the IRS will notice the discrepancy. You may receive a notice asking why the amount on your return does not match what the bank reported. This triggers a review that can result in additional tax owed, plus penalties and interest charges on the unpaid amount.

When your bank sends Form 1099-INT

Your bank must send you Form 1099-INT by January 31 if you earned $10 or more in interest during the calendar year. You will receive it by mail or through your online banking portal, depending on how your bank communicates.

If you earned less than $10, the bank is not required to send a form. However, you are still required to report that interest on your tax return. Keep your monthly statements or year-end summary from your bank as proof of the amount if you need it later.

If you have multiple savings accounts at different banks, you may receive more than one Form 1099-INT. Each form covers only the interest from that specific institution.

Where to report the interest on your tax return

The location depends on how much interest you earned and whether you have other interest income. If you earned interest only from one savings account and the total is $1,500 or less, you can report it directly on Form 1040 (the main federal income tax form) on the line for interest income. The amount goes into your total income for the year.

If you earned more than $1,500 in interest, or if you have interest from multiple sources (savings accounts, bonds, CDs, and so on), you must use Schedule B, which is a supplemental form that lists all your interest income. You then transfer the total from Schedule B to Form 1040. Schedule B also requires you to list each source of interest separately.

If you use tax software, the program will guide you to the correct location based on your answers about your income sources. If you file by hand or work with a tax preparer, they will know where to place the interest amount.

What happens if you do not report the interest

The IRS will eventually notice that your return does not match the Form 1099-INT the bank filed. When this happens, you will receive a notice in the mail, usually several months after you file. The notice will show the discrepancy and ask you to explain or pay the difference.

If you owe additional tax, you will be charged interest on that amount from the original due date of your return (usually April 15). You may also face a penalty. The penalty for underreporting income is typically 20 percent of the underpaid tax, though it can be lower if you have reasonable cause for the error.

The safest approach is to report the interest when you file, even if the amount is small. It takes seconds to add to your return and prevents months of back-and-forth with the IRS later.

How interest income affects your tax bracket and other benefits

Interest income is taxed as ordinary income, meaning it is added to your wages, self-employment income, and any other income you earned during the year. This can push you into a higher tax bracket, which means a larger portion of your total income is taxed at a higher rate.

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 disqualify you. Similarly, if you are receiving Social Security benefits, interest income counts toward the threshold that triggers taxation of your benefits.

The amount of interest you earn on a savings account is usually small enough that it does not significantly change your tax situation. However, if you have a large balance or a high-yield account, the interest can be substantial enough to matter.

Frequently Asked Questions

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

Yes. The bank is not required to send you a Form 1099-INT if you earned less than $10, but you must still report the interest on your tax return. Use your bank statement as documentation of the amount.

What if I lost my Form 1099-INT?

Contact your bank and request a duplicate. Most banks can reissue the form or provide a statement showing the interest paid. You can also log into your online banking account and read a year-end summary that shows the interest earned.

Can I deduct expenses related to my savings account?

No. Interest income is reported as income, but you cannot deduct fees, account maintenance charges, or other costs related to the account. Those are personal expenses and are not tax-deductible.

What if I have a joint savings account with someone else?

The bank will issue a Form 1099-INT showing the full interest amount and will send copies to both account holders. Each person must report their share of the interest on their own tax return. You and the other account holder should agree on how to split the interest (usually 50/50 unless you own it differently) and report accordingly.

Does interest from a savings account count as earned income?

No. Interest is considered unearned income. This matters if you are trying to meet income requirements for certain programs or if you are self-employed and calculating your self-employment tax. Unearned income does not count toward self-employment tax.