You must report savings account interest on your federal tax return if you earned $10 or more in a single year, though the threshold varies slightly by filing status and age
The IRS requires you to report interest income on Form 1040 or Form 1040-SR. Your bank will send you a Form 1099-INT in January showing how much interest you earned during the previous year. If you earned $10 or more, the bank must issue this form, and you must report it. If you earned less than $10, the bank may not send a form, but you still owe tax on that interest — you just have to calculate and report it yourself.
The $10 threshold is a reporting requirement, not a tax threshold. Even $1 of interest is technically taxable income. However, if your total income is low enough that you don't have to file a return at all, you won't owe tax on the interest. The income level at which you must file depends on your age, filing status, and whether you have self-employment income.
Interest from savings accounts is taxed as ordinary income at your regular tax rate, not at a lower capital gains rate. This means a high-yield savings account earning 4% or 5% annually can push you into a higher tax bracket if you have other income, or it can create a tax bill you weren't expecting if you thought the interest was too small to matter.
Key Takeaways
- Your bank sends Form 1099-INT if you earned $10 or more in interest during the year, and you must report this amount on your federal return.
- Interest under $10 is still taxable, but your bank won't send a form — you report it yourself if you file a return.
- Interest income is taxed at your ordinary income tax rate, which can push you into a higher bracket or create an unexpected tax bill.
- You do not have to file a return at all if your total income is below the threshold for your age and filing status, even if you earned interest.
- State income tax rules vary — some states tax interest, some don't, and some have different thresholds than the federal $10 rule.
How the Form 1099-INT works and when you receive it
Banks and credit unions issue Form 1099-INT to you and to the IRS by January 31 each year. The form shows interest earned during the previous calendar year. If you have multiple savings accounts at different banks, you will receive a separate 1099-INT from each one. You then add all the interest amounts together and report the total on your return.
If your bank made an error on the 1099-INT — for example, it shows $500 when you only earned $300 — contact the bank immediately and ask for a corrected form. The bank will issue a corrected 1099-INT and send it to both you and the IRS. Do not ignore the discrepancy; the IRS will match the 1099-INT it received against your return, and a mismatch can trigger an audit notice.
If you earned interest but did not receive a 1099-INT by early February, contact your bank. It may have the wrong address on file, or the interest may have fallen below the $10 threshold and the bank chose not to issue one. Either way, you still owe tax on the interest you earned.
Income thresholds for filing a return when you have interest income
Whether you must file a return depends on your total income, not just interest. For 2024, a single person under 65 must file if their gross income is $14,600 or more. For those 65 and older, the threshold is $18,350. These numbers increase slightly each year for inflation. If you are married filing jointly, the thresholds are higher — $29,200 for those under 65 and $30,750 if both spouses are 65 or older.
If your only income is $8,000 in interest and you are single and under 65, you do not have to file a federal return because your income is below $14,600. However, if you earned $8,000 in interest plus $7,000 in wages, your total is $15,000 and you must file. The interest is still taxable even if you don't file, but you won't owe a penalty for not filing if you had no tax liability.
These thresholds are for federal tax only. State rules differ. Some states have lower income thresholds, and some states do not tax interest income at all. Check your state's tax authority website to see whether you must file a state return.
How interest income affects your tax bracket and refund
Interest is added to your other income to calculate your total taxable income. If you earn $50,000 in wages and $2,000 in interest, your taxable income is $52,000. That extra $2,000 may push you into a higher tax bracket, meaning you pay a higher percentage on that portion of your income. It can also reduce or eliminate a tax refund if you were counting on a refund to cover other expenses.
High-yield savings accounts have made this more common. An account earning 4.5% on a $50,000 balance generates $2,250 in annual interest. If you did not adjust your withholding or make estimated tax payments, you may owe money when you file instead of receiving a refund. You can adjust your W-4 with your employer to have more tax withheld from your paycheck, or you can make quarterly estimated tax payments if you have no employer withholding.
If you are retired and living on interest and investment income, the effect is even larger. Interest is ordinary income, so it is taxed at your full rate. Some retirees move money to municipal bonds or other tax-advantaged investments to reduce their tax bill, but that requires planning with a tax professional.
State income tax rules for savings account interest
Federal tax is not the only tax on interest. Most states tax interest income the same way the IRS does — as ordinary income. However, some states do not tax interest at all. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no 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 return using the same 1099-INT your bank sent you. Some states have their own income thresholds below which you don't have to file. For example, Illinois has a lower threshold than the federal requirement. Check your state's Department of Revenue or tax authority website for the current rules.
If you moved during the year, you may owe tax to two states. The state where you lived on December 31 is usually the one that taxes your full-year income, but some states tax income earned while you were a resident. This is rare for interest income but common for wages. If you moved, file a part-year return in the state you left and a full-year return in the state you moved to.
What to do if you earned less than $10 in interest
If your bank did not send a 1099-INT because your interest was under $10, you still owe tax on it. You report it on line 2b of Form 1040 or Form 1040-SR, in the section for interest income. Write "Form 1099-INT not received" next to the amount if you want to explain why you are reporting interest without a form.
This situation is common with savings accounts that earn very little interest, or accounts you opened late in the year. It can also happen if you had multiple accounts at the same bank and the total interest across all accounts was under $10 — the bank may not issue a form even though you earned interest in each account.
Keep your own records of interest earned. Your bank statement shows deposits of interest each month. If you add them up and they don't match what the bank reported on the 1099-INT, or if you didn't receive a form, you have documentation to support your return.
Frequently Asked Questions
Do I have to report interest if I'm not filing a tax return?
If you are not required to file a return because your income is below the threshold, you do not have to report the interest. However, if you file a return for any reason — to get a refund of withheld taxes, for example — you must report all interest you earned, even if it is under $10.
What if I earned interest in a joint account?
The bank will issue a 1099-INT in the name and Social Security number of the account owner. If the account is in both names, the bank typically reports it to the first owner listed. You and the other owner must decide how to split the interest on your individual returns. This is a matter between you and the other owner; the IRS does not require you to file a specific form to report the split.
Can I deduct interest I paid on a loan from the interest I earned?
No. Interest you earned is income. Interest you paid on a personal loan, credit card, or car loan is not deductible for most people. Mortgage interest and student loan interest have their own deductions, but they are separate from interest income and do not offset each other on your return.
Does interest from a money market account get reported the same way?
Yes. Money market accounts, certificates of deposit (CDs), and other savings products all generate interest reported on Form 1099-INT. The rules are identical to a regular savings account. If you have multiple CDs or money market accounts, add all the interest together and report the total.
What if my bank sent me a 1099-INT but I think the amount is wrong?
Contact your bank and ask them to review the calculation. If they made an error, they will issue a corrected 1099-INT. If the amount is correct but you disagree with how it should be taxed, that is a question for a tax professional or the IRS, not the bank. Do not ignore a 1099-INT you believe is wrong — report it on your return and explain the discrepancy if necessary.