Yes, you must report all savings account interest on your federal tax return, no matter how small the amount
The IRS requires you to report every dollar of interest your savings account earns. There is no minimum threshold — even $1 in interest must be reported. Your bank will send you a Form 1099-INT if your interest reaches $10 or more in a calendar year, but you are required to report interest below $10 as well, even if you never receive a form.
Interest counts as ordinary income and is taxed at your regular income tax rate. This applies to traditional savings accounts, money market accounts, certificates of deposit (CDs), and any other account where a bank pays you interest. The interest is taxable in the year you earn it, regardless of whether you withdraw the money or leave it in the account.
State and local taxes follow the same rule. Most states that have an income tax require you to report the same interest income you report to the IRS. A few states do not tax interest income at all, but you still need to know your state's specific rules.
Key Takeaways
- You must report all savings account interest on your federal tax return, even amounts under $10 that do not generate a Form 1099-INT.
- Your bank sends Form 1099-INT only when interest reaches $10 or more, but the absence of a form does not mean you skip reporting smaller amounts.
- Interest is taxed as ordinary income at your regular tax rate, not at a special lower rate.
- State income tax rules vary — some states tax interest and some do not, so check your state's requirements.
- If your bank reports interest to the IRS on a 1099-INT, the IRS will expect to see that same amount on your return.
When your bank sends you Form 1099-INT
Banks mail Form 1099-INT to you and report the same information to the IRS when your interest reaches $10 or more during the calendar year. You will receive it by January 31 of the following year. The form shows the account number, the amount of interest earned, and sometimes other details like early withdrawal penalties.
If you have multiple accounts at the same bank, the interest may be combined on a single 1099-INT, or you may receive separate forms — this depends on how the bank structures your accounts. If you have accounts at different banks, each bank sends its own form.
The copy you receive is for your records. You do not mail it with your tax return, but you do need to have it when you file so you can enter the interest amount correctly. The IRS receives a copy directly from the bank, so if you report a different amount than what appears on the form, the IRS will likely notice the discrepancy.
Interest below $10 that does not trigger a 1099-INT
If your interest earns less than $10 in a year, your bank will not send you a Form 1099-INT. However, you are still required to report that interest on your tax return. You will need to track it yourself by checking your account statements or year-end summary from your bank.
Many people miss this requirement because they assume no form means no reporting obligation. The IRS does not receive a report from the bank in this case, but that does not change what you owe. If you are audited and the IRS reviews your bank statements, they will see the interest and expect to see it on your return.
The safest approach is to add up all interest from all your accounts, regardless of amount, and report the total on your return. This takes a few minutes and eliminates the risk of an error.
How to report interest on your tax return
Interest income goes on Schedule B (Interest and Ordinary Dividends) if you are filing Form 1040. You list each account separately if you received a 1099-INT, or you can combine multiple small amounts into one line if they came from accounts that did not trigger a form.
If your total interest is $1,500 or less and you have no other investment income, you may be able to report interest directly on Form 1040 without filing Schedule B — the rules depend on your filing status and other income. Your tax software will guide you through this, or a tax preparer can advise you on what forms you need.
The interest amount you report should match the total on all your 1099-INT forms combined, plus any interest below $10 that you tracked yourself. If the numbers do not match, make a note of why (for example, "Account closed in June, interest earned through June 30") so you can explain it if the IRS asks.
What happens if you do not report interest income
If your bank reports interest to the IRS on a 1099-INT and you do not report it on your return, the IRS will catch the discrepancy when they match your return against the forms they received from banks. They may send you a notice asking you to pay the tax you owe plus interest and penalties.
The penalty for underreporting income is typically 20% of the underpaid tax, plus interest that accrues from the original due date. If the IRS determines the underreporting was intentional, the penalty can be higher. Even if the amount is small, the penalty and interest can add up quickly.
If you discover you missed reporting interest in a prior year, you can file an amended return (Form 1040-X) for that year. Filing an amendment voluntarily before the IRS contacts you may reduce or eliminate penalties, depending on the circumstances and how long ago the return was filed.
Interest from different account types
All interest is treated the same way for tax purposes, regardless of the account type. A high-yield savings account, a traditional savings account, a money market account, and a CD all generate taxable interest that must be reported. The rate does not matter — a 0.01% account and a 5% account are both reported the same way.
Interest from bonds, Treasury bills, and other fixed-income investments also goes on Schedule B and follows the same reporting rules. If you own bonds that pay interest, that interest is taxable in the year you receive it (or in some cases, the year it accrues, depending on the bond type).
The only exception is interest from certain municipal bonds, which may be exempt from federal income tax. If you own municipal bonds, the 1099-INT you receive will specify which interest is taxable and which is not. You report only the taxable portion.
State income tax reporting
Most states that tax income require you to report the same interest you report to the federal government. Some states follow federal rules exactly, while others have slightly different thresholds or reporting requirements. A few states — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not tax interest income at all.
If you live in a state with income tax, check your state's tax agency website or ask a tax preparer about the specific rules. Some states use a different form than the federal Schedule B, and some allow you to report interest directly on the state return without a separate schedule.
If you moved during the year or earned interest in multiple states, you may need to file returns in more than one state. Each state taxes only the income you earned while living there, so your reporting may differ by state.
Frequently Asked Questions
Do I have to report interest if I did not withdraw the money?
Yes. Interest is taxable in the year you earn it, not in the year you withdraw it. If interest sits in your account and compounds, you still report it on your return for the year it was earned. This applies even if you never touch the money.
What if I have a joint savings account with my spouse?
The interest is typically split between you and your spouse based on your ownership percentage. Your bank may issue separate 1099-INT forms to each of you, or one form to the primary account holder. Check with your bank about how they report joint account interest, then report your share on your return.
Can I deduct any expenses related to my savings account?
No. Interest income is reported as-is with no deductions. Account fees, overdraft charges, and other costs are not deductible against interest income. You report the full interest amount your bank paid you.
What if my bank made an error on the 1099-INT?
Contact your bank and ask them to issue a corrected form (Form 1099-INT with a "CORRECTED" box marked). Once you receive the corrected form, report the correct amount on your return. If you already filed, you may need to file an amended return to match the corrected form.
Is interest from a savings account taxed differently than other income?
No. Interest is taxed as ordinary income at your regular tax rate. It is not may be able to access for the lower capital gains rates that explore to some investments. The rate you pay depends on your total income and filing status, not on the type of income.