You must report savings account interest as income on your federal tax return if you earned more than $10 in interest during the year, though some states have lower thresholds or no threshold at all.

The IRS requires you to include interest income on your tax return because interest is taxable income. Your bank will send you a Form 1099-INT in January if you earned $10 or more in interest during the previous year. Even if you don't receive the form, you still owe tax on the interest—the $10 threshold is just when the bank is required to report it to you and the IRS.

If you earned less than $10, you don't have to file a 1099-INT, but you still need to report the interest if you file a tax return. The only exception is if you have no tax filing requirement at all—meaning your total income falls below the threshold where you're required to file. That threshold depends on your age, filing status, and type of income.

Key Takeaways

  • Banks send Form 1099-INT when interest reaches $10 or more, but you owe tax on all interest income regardless of whether you receive the form.
  • Interest income goes on Schedule 1 (Form 1040) and is added to your other income to determine your tax bracket and total tax owed.
  • Some states tax savings account interest and some do not, so your state return may require different reporting than your federal return.
  • If you earned interest but didn't receive a 1099-INT, contact your bank to request one or use your account statements to calculate the amount yourself.

How the IRS knows about your interest income

Your bank reports interest payments to the IRS on Form 1099-INT. The bank keeps a copy, sends one to you, and sends one to the IRS. The IRS then matches what you report on your tax return against what the bank reported. If you don't report interest that the bank already reported, the IRS will notice the discrepancy and may send you a notice or bill you for the unpaid tax plus penalties and interest.

This matching happens automatically through the IRS's computer systems. You don't have to worry about the IRS calling or visiting—but if there's a mismatch, you'll receive a letter in the mail. The safest approach is to report all interest income, even small amounts, because the bank has already told the IRS about it.

Where interest income appears on your tax return

Interest income goes on Schedule 1 (Form 1040), which is where you report all types of income beyond wages. You'll list the total interest from all your savings accounts, money market accounts, and CDs in one line. If you have multiple accounts at different banks, add them all together and report the total.

That total then transfers to your main Form 1040, where it gets added to your wages, self-employment income, and any other income you earned. The combined total determines your tax bracket and how much tax you owe. Even a small amount of interest can push you into a higher bracket if your income is close to a bracket boundary, though this is rare unless you have very little other income.

State tax requirements for savings account interest

Most states that have an income tax also tax savings account interest the same way the federal government does. However, a few states do not tax interest income at all. States with no income tax—including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—do not tax savings account interest. New Hampshire and Tennessee tax only dividend and interest income, not wages.

If you live in a state that taxes interest, you'll report it on your state tax return using a form similar to the federal Schedule 1. Check your state's tax website or ask a tax preparer if you're unsure whether your state taxes interest income. Some people move to no-tax states specifically to avoid this, but you only get that benefit if you're a resident of that state for tax purposes.

What to do if you didn't receive a 1099-INT

If you earned $10 or more in interest but your bank didn't send you a Form 1099-INT by late January, contact the bank directly. Ask them to issue the form or provide a statement showing the interest paid. Keep the statement with your tax records even if the bank says they don't need to send a 1099-INT—you'll need it to report the income on your return.

If the bank cannot locate the interest or says it was below $10, use your account statements to calculate it yourself. Add up all the interest deposits from January through December of the tax year. Report that total on your tax return. If the IRS later receives a corrected 1099-INT from the bank, you can file an amended return, but it's better to get the correct amount from the start.

Interest from joint accounts and accounts held in trust

If you own a savings account jointly with another person, the bank reports the total interest to both of you on separate 1099-INT forms. You and the other owner must decide how to split the interest for tax purposes. Usually this matches how you own the account—50/50 for joint owners, or according to the trust document if the account is held in trust. Each person reports only their share on their own tax return.

If you're the trustee of an account held in trust for a minor or another person, the rules are more complex. The interest may be taxable to the beneficiary, the trust itself, or split between them depending on the trust terms and whether the beneficiary has reached age 18. Consult a tax professional if you're managing a trust account, because the reporting requirements differ from personal accounts.

How much tax you'll owe on interest income

Interest income is taxed as ordinary income, meaning it's taxed at your regular income tax rate. If you're in the 12% tax bracket, you'll owe roughly 12% of your interest in federal tax (the exact amount depends on your total income and deductions). State tax, if your state taxes interest, is added on top of that.

The amount of tax also depends on whether you take the standard deduction or itemize deductions. If your total income is low enough, you may not owe any tax at all because the standard deduction shields some income from taxation. A tax software program or tax preparer can calculate your exact liability once you know your total interest and other income.

Frequently Asked Questions

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

The bank doesn't have to send you a 1099-INT if interest is under $10, but you still owe tax on it if you file a return. Report the interest on Schedule 1 using your account statements. The only exception is if you have no filing requirement because your total income is below the threshold for your filing status.

What if I have interest from multiple banks?

Add up the interest from all your accounts and report the total on one line of Schedule 1. You don't need to list each bank separately. If any single bank paid you $10 or more, they'll send you a 1099-INT for their portion, but you still combine everything on your return.

Can I deduct savings account fees against the interest I earned?

No. You report the full interest amount as income and cannot subtract fees or other account costs. However, if you paid investment fees or tax preparation fees related to your savings accounts, those may be deductible in limited situations—consult a tax professional about your specific circumstances.

What happens if the bank reports interest I didn't actually receive?

Contact the bank immediately and ask them to issue a corrected 1099-INT. Explain that the interest was not deposited or was removed from the account. The bank can file a corrected form with the IRS. Report the corrected amount on your tax return, and keep documentation from the bank showing the error in case the IRS questions the discrepancy.