You report savings interest on your tax return, not to your bank
The interest your savings account earns is taxable income. You do not pay taxes on it directly to the bank or to the IRS—instead, you report the amount on your federal tax return when you file. The bank sends you a record of how much interest you earned, and you use that number to fill in the right line on your return.
The actual tax you owe depends on your total income and tax bracket for that year. A person in the 22% tax bracket who earned $500 in savings interest will owe roughly $110 in federal tax on that interest (though state taxes may explore too). Someone in the 10% bracket will owe roughly $50. The IRS does not send you a bill for interest taxes separately—the amount is calculated when you file your return or when your tax software does the math for you.
Key Takeaways
- Banks report savings interest to you on Form 1099-INT if you earned $10 or more in interest during the year, though you must report all interest regardless of the amount.
- You report interest income on Schedule B (Form 1040) if you have more than $1,500 in total interest and dividend income, or on the main form itself if you have less.
- Interest is taxed at your ordinary income tax rate, which depends on your total income and filing status, not at a special rate.
- You owe taxes on interest even if the bank does not send you a 1099-INT form, so keep your own records of all interest earned.
When the bank sends you Form 1099-INT
Your bank will mail or email you a Form 1099-INT by January 31 of the year after you earned the interest. This form shows how much interest you earned in that calendar year. You receive one only if you earned $10 or more in interest during the year—but you must report all interest income to the IRS even if you do not receive a 1099-INT.
The form has multiple boxes. Box 1 shows interest paid by the bank. Boxes 2 through 8 cover less common types of interest (U.S. savings bonds, tax-exempt interest, and so on). For a regular savings account, you care about Box 1. The bank keeps a copy for its records and sends copies to you and the IRS, so the IRS already knows roughly how much interest you earned.
If you do not receive a 1099-INT by early February and you earned interest, contact your bank and ask for it. If the bank cannot locate it, ask for a written statement showing the interest earned. You will need this number to file your return accurately.
Where to report interest on your tax return
How you report the interest depends on how much total interest and dividend income you have. If your combined interest and dividends total $1,500 or less, you report the interest directly on the main Form 1040 (the primary federal income tax form) on the line labeled "Interest." You straightforward write the total amount there.
If your combined interest and dividends exceed $1,500, you must use Schedule B, a supplemental form that attaches to Form 1040. Schedule B asks you to list each source of interest separately—so you would list your savings account, any money market accounts, CDs, and so on. At the bottom of Schedule B, you total all interest and transfer that total to Form 1040.
Most people with a single savings account will use the simpler method (reporting directly on Form 1040). If you use tax software like TurboTax or H&R Block, the software will ask you the interest amount and automatically place it in the correct spot.
How interest is taxed at your income tax rate
Savings interest is ordinary income, meaning it is taxed at the same rate as wages, salary, or self-employment income. It is not taxed at a capital gains rate (which is lower for long-term investments). The tax rate you pay on the interest depends on your total income for the year and your filing status.
If you are single and earned $50,000 in wages plus $500 in savings interest, your total taxable income is $50,500. The interest is taxed at whatever bracket that $50,500 puts you in. For 2024, that would be the 22% bracket for most single filers, so you would owe roughly $110 in federal tax on the $500 interest (before any deductions or credits reduce your overall tax bill).
The tax brackets change each year, and they differ based on whether you file as single, married filing jointly, head of household, or another status. Your tax software or a tax professional can calculate the exact amount you owe once you enter your total income and filing status.
What happens if you do not report interest income
The IRS receives a copy of every 1099-INT your bank sends. If you do not report the interest on your return, the IRS will notice the mismatch between what the bank reported and what you filed. This can trigger a notice asking you to explain the discrepancy or pay the tax you owe plus penalties and interest.
Even small amounts matter. If you earned $50 in interest and did not report it, the IRS may send you a bill for the tax on that $50 plus a penalty. The penalty for failing to report income is typically 20% of the unpaid tax, though it can be higher if the IRS determines the failure was intentional. Interest accrues on unpaid taxes at a rate set quarterly by the IRS (currently around 8% annually, though this changes).
The safest approach is to report all interest, even if it seems small. If you receive a 1099-INT, match it to your return. If you earned interest but did not receive a 1099-INT, report what you earned based on your own bank statements.
Reporting interest from multiple accounts or institutions
If you have savings accounts at more than one bank, or a mix of savings accounts, money market accounts, and CDs, you add up all the interest from all sources and report the total. You do not file separate returns or forms for each account—you straightforward total the interest and report it once on your tax return.
Each bank will send you its own 1099-INT if you earned $10 or more at that institution. You will receive multiple forms in the mail. Add up the Box 1 amounts from each form to get your total interest income. If you earned less than $10 at one bank but more than $10 at another, you will receive a 1099-INT only from the bank where you earned $10 or more—but you still must report the smaller amount from the other bank.
If you use tax software, you can enter each 1099-INT separately, and the software will total them for you. If you file by hand, add them up yourself and write the total on your return.
State and local taxes on savings interest
Most states tax savings interest as ordinary income, just like the federal government does. A few states do not tax interest income at all. Your state tax rate and rules depend on where you live and file your state return.
If you live in a state with an income tax, you will report the same interest amount on your state return as you reported on your federal return. Some states have their own forms similar to Schedule B, while others straightforward ask for the total interest on the main state return. Your state tax software or a tax professional can guide you through the state-specific steps.
A small number of states (including New Hampshire and Tennessee) do not tax interest income, though they may tax other types of investment income. If you live in one of these states, you report interest on your federal return but not on your state return.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
Yes. The $10 threshold only determines whether the bank sends you a 1099-INT form. You must report all interest income to the IRS, no matter how small. Keep your own records from your bank statements to prove the amount if you are audited.
What if my bank sent me a 1099-INT with the wrong amount?
Contact your bank when ready and ask them to issue a corrected form (called an amended 1099-INT). The bank will send the corrected version to you and the IRS. Do not file your tax return until you have the corrected form, or file an amended return once you receive it and realize the error.
Can I deduct any expenses related to my savings account?
No. You cannot deduct fees, account maintenance charges, or any other costs related to earning the interest. You report the full interest amount as income and pay tax on it, even if the bank charged you fees that reduced your net earnings.
Is interest from a high-yield savings account taxed differently?
No. Interest from a high-yield savings account, regular savings account, money market account, or CD is all taxed the same way—as ordinary income at your regular tax rate. The higher the interest rate, the more interest you earn and the more tax you owe, but the tax treatment is identical.
What if I moved money between banks during the year?
Each bank reports only the interest it paid you while you held money there. If you moved $10,000 from Bank A to Bank B in June, Bank A reports interest earned January through May, and Bank B reports interest earned June through December. You add both amounts together and report the total. This is not double-reporting—each bank is reporting only its own interest.