Yes, you must report all savings account interest as income on your federal tax return

The IRS requires you to report every dollar of interest your savings account earns, no matter how small. Your bank sends you a Form 1099-INT each January showing the interest paid in the previous year. You report this amount on your tax return, and it counts as taxable income at your ordinary income tax rate.

The only exception is if your interest income falls below the reporting threshold. For 2024, you do not receive a Form 1099-INT if you earned less than $10 in interest from that bank. However, you still owe tax on that interest — you just have to track it yourself and report it even without the form.

Some states also tax savings interest, though a few do not. Your state tax return may have a separate line for interest income, or it may be included in your federal taxable income calculation. Check your state's tax website or ask a tax preparer about your specific state's rules.

Key Takeaways

  • Banks report interest of $10 or more on Form 1099-INT, which you receive by January 31 each year.
  • You must report all interest income on your federal tax return, even amounts under $10 that do not generate a 1099-INT.
  • Savings account interest is taxed as ordinary income at your regular tax rate, not at a lower capital gains rate.
  • Some states tax savings interest and some do not, so check your state's rules or consult a tax preparer about your situation.
  • If you have multiple savings accounts, each bank sends its own 1099-INT, and you add all the interest together on your return.

How the Form 1099-INT works and when you receive it

Your bank generates a Form 1099-INT for each account that earned $10 or more in interest during the calendar year. The bank mails or emails this form to you by January 31. The form shows the account number, the total interest paid, and the bank's tax ID number. You receive a copy for your records and a copy goes to the IRS.

If you have savings accounts at multiple banks, each bank sends its own 1099-INT. You do not combine them into one form — you receive separate forms from each institution. When you file your tax return, you add up all the interest from all your 1099-INTs and report the total.

If a bank closes your account during the year, it still sends a 1099-INT if you earned $10 or more in interest before the account closed. The form will show the interest earned up to the closing date.

What to do if you earned interest but did not receive a 1099-INT

If you earned less than $10 in interest, your bank does not send a 1099-INT. You still owe tax on that interest. You must report it on your tax return by adding it to your other income, even though you have no form from the bank.

Keep your savings account statements from December and January so you can verify the interest amount if needed. If you use tax software, most programs have a line where you can enter interest income that was not reported on a 1099-INT. If you work with a tax preparer, tell them about any interest you earned that did not generate a form.

The IRS does not know about interest under $10 unless you report it, but you are still legally required to include it. Failing to report it is considered tax evasion, even though the amount is small.

How savings interest is taxed differently from other income

Savings account interest is taxed as ordinary income, meaning it is added to your wages, self-employment income, and other earnings and taxed at your regular income tax rate. If you are in the 22% tax bracket, interest income is taxed at 22%, not at a lower rate.

This is different from long-term capital gains (profit from selling stocks or real estate you held over a year), which are taxed at lower rates. Savings interest gets no preferential treatment — it is treated the same as a paycheck.

High-yield savings accounts pay more interest than traditional savings accounts, so they generate larger 1099-INT forms and larger tax bills. Before moving money to a high-yield account, consider that the extra interest you earn will be taxed at your full rate.

State taxes on savings account interest

Most states tax savings account interest as part of your state income tax. However, a handful of states do not tax interest income at all. These include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — none of which have a state income tax. New Hampshire and Tennessee tax only interest and dividend income, not wages.

If you live in a state that taxes interest, you report it on your state tax return. Some states use the same amount you reported to the IRS; others have different rules. Your state tax form usually has a line for interest income, or it may be included in a broader "income" category.

If you moved during the year, you may owe tax to both your old state and your new state for the portion of the year you lived in each. Check the tax rules for both states or ask a tax preparer about how to handle a mid-year move.

What happens if you do not report savings interest

When your bank sends a 1099-INT to the IRS, the IRS receives a copy with your Social Security number and the interest amount. The IRS matches this information against your tax return. If you do not report the interest, the IRS will notice the discrepancy.

The IRS may send you a notice asking why the interest on your return does not match the 1099-INT. You can then file an amended return and pay the tax owed, plus interest and penalties. The penalty for underreporting income is typically 20% of the underpaid tax, plus interest calculated from the original due date.

Even if the interest is small, it is not worth the risk. Reporting it takes seconds on your tax return, and it keeps you in compliance with the law.

Frequently Asked Questions

Do I have to report interest if I closed the account before the end of the year?

Yes. If you earned $10 or more in interest before closing the account, the bank still sends a 1099-INT showing the interest earned through the closing date. You report that interest on your tax return for the year you earned it, not the year you closed the account.

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

The bank reports the full interest amount on a 1099-INT to the person whose Social Security number is listed first on the account. That person is responsible for reporting it on their tax return. If you and the other account holder split the interest, you may need to file an amended return or work out a separate arrangement, but the IRS initially expects the first-listed owner to report it all.

Can I deduct any expenses related to my savings account?

No. Interest income is reported as-is with no deductions. Account fees, minimum balance penalties, and other costs related to the account cannot offset the interest you report. You report the full interest amount and pay tax on it.

Do I need to report interest from a savings account I opened for my child?

If the account is in your child's name and Social Security number, your child must report the interest on their tax return (or you report it on their behalf if they are a dependent). If the account is in your name, you report it. The person whose Social Security number is on the account is responsible for reporting the interest.

What if my bank made an error on the 1099-INT amount?

Contact your bank immediately and ask them to issue a corrected 1099-INT (called a Form 1099-INT with a corrected box marked). The bank will send the corrected form to you and the IRS. Once you receive the corrected form, report the correct amount on your tax return. If you already filed, you may need to file an amended return.