Yes, you must report all interest earned on a savings account, no matter how small

The IRS requires you to report every dollar of interest your savings account earns. There is no minimum threshold — even $1 of interest must be reported on your tax return. The bank will send you a Form 1099-INT in January or February showing what you earned the previous year, and you use that form to fill in your tax return.

The requirement applies to all savings accounts: traditional savings, money market accounts, high-yield savings accounts, and certificates of deposit (CDs). It does not matter whether the interest is substantial or trivial. It does not matter whether you withdrew the money or left it in the account. If the bank paid you interest, you report it.

The only exception is interest that was not actually paid to you — for instance, if you closed an account before the interest posted, or if the bank reversed a deposit. But once interest hits your account, even if you never touch it, you owe tax on it.

Key Takeaways

  • The IRS requires reporting of all savings account interest, regardless of amount, and there is no dollar minimum.
  • Banks send Form 1099-INT by January 31 each year, showing the previous year's interest earnings.
  • You report the interest amount on your tax return, and it is taxed as ordinary income at your regular tax rate.
  • If you earn interest in multiple accounts or institutions, you add all of it together on one line of your return.
  • Failure to report interest the bank reported to the IRS can trigger a mismatch notice and additional tax liability.

How the bank reports your interest to the IRS

Your bank is required to send you a Form 1099-INT if you earned $10 or more in interest during the calendar year. The form arrives by January 31 and shows the total interest paid into your account in the previous year. The bank also sends a copy to the IRS, so the agency has a record of what you earned.

If you earned less than $10, the bank may not send you a 1099-INT, but you still must report the interest on your return. This is where many people make a mistake: they assume no form means no reporting requirement. It does not. You are responsible for tracking and reporting all interest, whether or not you receive a form.

If you have multiple savings accounts at different banks, each bank sends its own 1099-INT. You will receive separate forms for each account. When you file your tax return, you add all the interest together and report the total on one line.

Where interest goes on your tax return

Interest income is reported on Schedule B (Interest and Ordinary Dividends) if you have more than $1,500 in interest and dividends combined. If you have less than $1,500 total, you can report it directly on Form 1040 without filing Schedule B. Either way, the interest is added to your taxable income and taxed at your ordinary income tax rate — the same rate as your wages or salary.

Interest is not taxed at a special rate. A dollar of interest is treated the same as a dollar of wages for tax purposes. If you are in the 22% tax bracket, you pay 22% tax on your interest. If you are in the 12% bracket, you pay 12%.

The interest is also subject to self-employment tax if you are self-employed, though this is rare and depends on your specific situation. For most people, interest is straightforward added to income and taxed at the regular rate.

What happens if you do not report interest the bank reported

The IRS matches the 1099-INT forms banks send against the tax returns people file. If a bank reports $500 in interest but you do not report it on your return, the IRS will notice the discrepancy. You will receive a notice asking you to explain the difference or pay the tax owed plus interest and penalties.

The penalty for not reporting interest is usually 20% of the unpaid tax, plus interest calculated from the original due date. If the IRS determines the omission was intentional rather than accidental, the penalty can be higher. Even if it was a genuine mistake, you still owe the tax and interest retroactively.

The easiest approach is to report the interest when you file. If you received a 1099-INT, use the amount on the form. If you earned less than $10 and did not receive a form, use your bank statement to find the interest posted to your account during the year.

Interest earned in the year you open or close an account

If you opened a savings account partway through the year, you report only the interest earned from the opening date forward. If you closed an account partway through the year, you report only the interest earned up to the closing date. The 1099-INT will reflect only the interest actually paid during the time your account was open.

If you moved money between accounts at the same bank or transferred to a different bank, each account reports its own interest separately. You add all of it together on your return. The transfer itself is not taxable — only the interest is.

Interest on joint accounts and accounts held by minors

If you hold a savings account jointly with another person, the bank reports the total interest on a single 1099-INT. You and the other account holder must decide how to split the interest for tax purposes. Usually this is split 50-50, but you can split it differently if you can document that one person contributed more of the principal. Whichever way you split it, the two of you must report the amounts consistently on your separate tax returns.

If a parent opens a savings account in a child's name, the interest is reported on a 1099-INT in the child's name and Social Security number. The child (or the parent, if the child is too young to file) must report this interest on a tax return. There is no age limit on the reporting requirement — even a newborn's interest must be reported if the account earned money.

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 1099-INT if you earned less than $10, but you must still report the interest on your tax return. Check your bank statement for the interest posted during the year and include it when you file.

What if my bank made a mistake and reported the wrong amount on the 1099-INT?

Contact the bank and ask them to issue a corrected 1099-INT (called an amended 1099-INT). Once you receive the corrected form, use the corrected amount on your tax return. If you already filed using the wrong amount, you may need to file an amended return.

Is interest from a high-yield savings account taxed differently than interest from a regular savings account?

No. All interest is taxed the same way, regardless of the account type or how much interest it earns. A high-yield account straightforward means you earn more interest, which means you report a larger amount — but the tax treatment is identical.

Can I deduct the taxes I pay on savings account interest?

No. Interest income is added to your taxable income, and you pay tax on it. You cannot deduct the tax itself. However, if you paid investment fees to earn the interest, those may be deductible in some cases — consult a tax professional about your specific situation.

What if I earned interest but the bank never sent me a 1099-INT?

The bank may not have sent one if you earned less than $10, or there may have been an error. Check your bank statement for the interest amount and report it on your return. If the bank reported it to the IRS but did not send you a form, the IRS will have a record and you should report the amount to avoid a mismatch notice.