Yes, you report savings account interest as income on your tax return
Any interest your bank pays you on a savings account counts as taxable income. The IRS treats it the same way it treats wages or other money you receive — you owe federal income tax on it. Your bank will send you a form called a 1099-INT (Interest Income) by January 31 each year, listing all the interest you earned in the previous year. You then report that amount on your tax return.
The amount of interest matters less than the fact that it exists. Even $5 in interest must be reported. If you earned more than $10 in interest during the year, your bank is required by law to send you the 1099-INT form. If you earned $10 or less, the bank may not send a form, but you still owe tax on it — you have to track it yourself and report it.
State income tax works the same way in most states. If your state has an income tax, you will report the same interest income on your state return. A few states (like Tennessee and New Hampshire) do not tax interest income, but those are exceptions.
Key Takeaways
- Your bank sends you a 1099-INT form by January 31 if you earned more than $10 in interest during the year.
- You report the interest amount from the 1099-INT on your federal tax return, usually on Schedule 1 or directly on Form 1040.
- Interest income is taxed at your ordinary income tax rate, not at a special rate, so the tax owed depends on your total income and tax bracket.
- If you earned $10 or less in interest, your bank may not send a form, but you still report it on your return.
- Most states tax savings account interest the same way the federal government does, though a handful of states do not.
Where the 1099-INT goes on your tax return
If you file Form 1040 (the main federal income tax form), interest income goes on Schedule 1, which is an attachment to Form 1040. You enter the total interest from your 1099-INT in the box labeled "Interest" on Schedule 1, line 1. That amount then flows to your Form 1040 and becomes part of your total income.
If you use tax software (TurboTax, H&R Block, TaxAct, or others), the software will ask you about interest income and automatically place it in the right spot. You simply enter the amount from your 1099-INT when prompted. If you file by hand or with a tax professional, they will handle the placement for you.
The key point: the IRS already knows about your interest income because your bank reported it. If you do not report it on your return, the IRS will notice the mismatch between what the bank reported and what you claimed. This can trigger a notice or audit.
How much tax you owe on the interest
Interest income is taxed at your ordinary income tax rate, which depends on your total income for the year and your tax bracket. If you earned $50,000 in wages and $200 in interest, that $200 is taxed at whatever rate applies to your income level — not at a special rate for interest.
For example, if you are in the 22% tax bracket, you owe roughly 22% of the interest in federal tax. If you are in the 12% bracket, you owe roughly 12%. The exact amount also depends on whether you take the standard deduction or itemize, and whether you have other income or deductions that affect your bracket.
You do not pay tax on the interest when you receive it. You pay tax when you file your return, usually by April 15 of the following year. If you owe a large amount of tax on interest (which is rare unless you have a very large savings balance), you may want to increase your withholding from your paycheck or make estimated tax payments during the year to avoid owing a big bill at tax time.
When you have multiple savings accounts or banks
If you have savings accounts at more than one bank, each bank will send you its own 1099-INT form if you earned more than $10 in interest at that bank. You add up all the interest from all the forms and report the total on your tax return.
For example, if you have a savings account at Bank A that earned $45 in interest and a high-yield savings account at Bank B that earned $120 in interest, you will receive two 1099-INT forms. You report $165 total on your return ($45 + $120).
Keep all your 1099-INT forms together when you file. You do not send them to the IRS, but you should keep them with your tax records in case you are asked to verify the amount you reported.
Interest from money market accounts and CDs
Money market accounts and certificates of deposit (CDs) work the same way as savings accounts for tax purposes. Any interest you earn is reported on a 1099-INT form and must be reported on your tax return. The bank sends the form by January 31, and you report the amount just as you would for a regular savings account.
If you have a CD that matures in a future year, you still report the interest in the year you earn it, not the year you withdraw the money. For example, if you buy a 2-year CD in January 2024, you report the interest earned in 2024 on your 2024 tax return, and the interest earned in 2025 on your 2025 return — even though you do not touch the money until 2026.
What to do if you do not receive a 1099-INT
If you earned more than $10 in interest but did not receive a 1099-INT form by February 15, contact your bank and ask for it. Banks are required to send the form, and if yours did not, it is usually a mistake or a delay in the mail.
If you earned $10 or less in interest, your bank is not required to send a form. You still owe tax on it, so you need to track the amount yourself. Check your bank statements for the year and add up all the interest deposits. Report that total on your tax return even if you do not have a 1099-INT form to back it up.
If you cannot find the interest amount in your statements, log into your online banking account and look for a year-end summary or interest statement. Most banks provide this information in their online portal or can email it to you if you ask.
Interest from joint accounts
If you own a savings account jointly with someone else, the bank will typically send the entire 1099-INT to one of you (usually the first person listed on the account). That person is responsible for reporting it, but the interest actually belongs to both owners based on how much each person contributed or how the account agreement specifies ownership.
If you and the other owner need to split the interest for tax purposes, you should work that out between yourselves and report only your share on your return. For example, if the 1099-INT shows $100 in interest but you own half the account, you report $50 on your return and the other owner reports $50 on theirs. Keep records of this agreement in case the IRS asks.
This situation is most common with spouses or parents and adult children. If you are unsure how to split the interest, ask a tax professional or contact the IRS directly.
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 form if you earned $10 or less, but you still owe tax on the interest. You must track it yourself from your bank statements and report it on your return. The IRS does not have a minimum threshold for reporting interest income — any amount counts.
What if my bank sent me a 1099-INT with the wrong amount?
Contact your bank immediately and ask them to issue a corrected form (called an amended 1099-INT). Once you receive the corrected form, report the correct amount on your tax return. If you already filed with the wrong amount, you may need to file an amended return (Form 1040-X) to correct it.
Can I deduct the taxes I pay on interest from my savings account?
No. Interest income is added to your total income, and you pay tax on it at your ordinary rate. You cannot deduct the tax itself. However, if you have other deductions (like mortgage interest or charitable donations), those may lower your overall tax bill.
Do I report interest on my state tax return too?
In most states, yes. If your state has an income tax, you report the same interest income on your state return. A few states (Tennessee, New Hampshire, and Illinois for some taxpayers) do not tax interest income, so check your state's rules. You will report the same 1099-INT amount on both your federal and state returns.
What if I moved during the year and have interest from two different states?
Report all your interest income on your current state's return. If you moved mid-year, you may owe tax to both your old state and your new state on a prorated basis, but that is handled through your state return, not through the 1099-INT. A tax professional can help you sort this out if it applies to you.