Savings accounts are included in your Modified Adjusted Gross Income (MAGI) calculation, but only the interest they earn—not the balance itself.

When you file taxes or apply for a program that uses MAGI, the IRS counts interest income from savings accounts as part of your income. The money sitting in the account does not count. If your savings account earned $150 in interest last year, that $150 gets added to your MAGI. The $10,000 balance does not.

This matters because MAGI thresholds determine whether you can use certain tax credits, deductions, or program benefits. A high savings account balance will not push you over an income limit by itself, but the interest it generates will. The IRS reports this interest to you on a Form 1099-INT if the account earned $10 or more in a calendar year.

Key Takeaways

  • Only the interest earned on a savings account counts toward MAGI, not the account balance itself.
  • Banks report savings account interest of $10 or more on a Form 1099-INT, which you receive by January 31.
  • Interest income is added to your adjusted gross income before any MAGI adjustments are applied.
  • Different programs and tax credits use different MAGI thresholds, so the same interest amount may affect one benefit but not another.

How interest income gets reported to the IRS

Your bank sends you a Form 1099-INT for any savings account that earned $10 or more in interest during the calendar year. You receive this form by January 31 of the following year. The form shows the total interest earned in Box 1, and that is the number you report on your tax return.

If you have multiple savings accounts at different banks, each bank sends its own 1099-INT. You add all the interest amounts together when you calculate your income. If you earned $45 in interest at Bank A and $62 at Bank B, you report $107 total.

Some savings accounts earn very little interest. If your account earned less than $10 for the year, the bank does not send a 1099-INT, but you still have to report the interest if you file a tax return. Check your year-end account statement to find the exact amount.

Where savings account interest appears on your tax return

Interest income goes on Schedule B (Interest and Ordinary Dividends) if you have more than $1,500 in total interest and dividend income for the year. If you have less than $1,500, you can report it directly on Form 1040, line 2b. Either way, the interest becomes part of your adjusted gross income (AGI) before MAGI adjustments are calculated.

MAGI is not a line on your tax return—it is a number you calculate by taking your AGI and adding back certain deductions. For most people, MAGI is the same as or very close to AGI. The interest from your savings account is already included in that AGI number, so it is already part of your MAGI.

How MAGI thresholds work with savings account interest

Different programs set different MAGI limits. The Affordable Care Act (ACA) marketplace uses one threshold, Medicaid uses another, and tax credits like the Earned Income Tax Credit (EITC) use yet another. A savings account earning $200 in interest might keep you under the limit for one program but push you over for another.

If you are close to a MAGI threshold for a benefit you need, the interest from your savings account could matter. For example, if the ACA marketplace premium tax credit phases out at $50,000 MAGI for your household size, and your household income is $49,900, even $100 in savings account interest would push you over. You would lose the credit or have to repay part of it at tax time.

The opposite can also happen: if you are below a threshold and your savings account interest is small, it may not be enough to disqualify you. You have to know the specific limit for the program you are checking.

Savings accounts versus other types of accounts

Money market accounts and certificates of deposit (CDs) work the same way as savings accounts—only the interest counts toward MAGI, not the principal. Checking accounts that earn interest are treated the same way. High-yield savings accounts report interest on a 1099-INT just like regular savings accounts.

Investment accounts (brokerage accounts, retirement accounts) follow different rules. Retirement accounts like 401(k)s and traditional IRAs do not count toward MAGI in most cases, even if they earn interest or dividends inside the account. Roth IRA contributions do not count, but Roth conversions do. Brokerage accounts count differently depending on whether the income is interest, dividends, or capital gains.

If you are unsure whether a specific account type affects your MAGI, check the 1099 form the institution sends you. The form type tells you what kind of income it is and how to report it.

What to do if you have high savings account interest

If your savings account is earning significant interest and you are near a MAGI threshold for a benefit, you have a few options. You can move money to a retirement account (like a traditional IRA or 401(k)) if you are not already maxing those out—money in those accounts does not generate MAGI-reportable interest in the same way. You can also use the money to pay down debt or make a large purchase, which reduces the balance and therefore the interest earned going forward.

Another option is to time large deposits. If you know you will be near a MAGI limit in a given year, depositing money late in the year means it will earn less interest before the year ends. This is a minor effect but can matter at the margins.

Do not avoid saving or move money around solely to game a MAGI threshold. The benefit of the tax credit or program is usually worth more than the interest you would earn anyway. Talk to a tax professional or the program administrator if you are unsure how your savings account interest affects your specific situation.

Frequently Asked Questions

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

If you earned less than $10, the bank will not send a 1099-INT. However, if you file a tax return, you still have to report all interest income, even amounts under $10. Check your account statement for the exact amount and include it on your return.

Will my savings account balance affect my MAGI?

No. Only the interest the account earns counts toward MAGI. A $50,000 balance does not affect your MAGI at all. Only the interest it generates—say, $200 per year—gets added to your income.

What if I have savings accounts at multiple banks?

Add up all the interest from all your accounts. Each bank sends its own 1099-INT if the account earned $10 or more. Report the total interest on your tax return. The IRS matches the 1099-INTs to your return, so make sure the total matches what you report.

Can I move money to avoid counting interest toward MAGI?

Moving money to a retirement account like a traditional IRA can reduce the interest that counts toward MAGI, since retirement accounts are treated differently. However, you can only contribute a certain amount per year ($7,000 for 2024, or $8,000 if you are 50 or older). Consult a tax professional before making large moves based on MAGI concerns.

Does interest from a high-yield savings account count differently?

No. High-yield savings accounts report interest the same way as regular savings accounts—on a 1099-INT if it is $10 or more. The interest is added to your MAGI just like any other savings account interest, even though the rate is higher.