Yes, you must report all savings account interest on your tax return, no matter how small the amount

The IRS requires you to report every dollar of interest your savings account earns. This includes interest from regular savings accounts, money market accounts, and certificates of deposit (CDs). There is no minimum threshold — even $1 of interest must be reported. Your bank will send you a Form 1099-INT in January or early February if your account earned $10 or more in interest during the previous year, but you still owe tax on smaller amounts even if you don't receive a form.

Interest income is taxed as ordinary income at your regular tax rate. This means it is added to your wages, self-employment income, or other earnings and taxed at whatever bracket you fall into. The tax you owe depends on your total income for the year, not just the interest amount.

Key Takeaways

  • You must report all savings account interest on your tax return, even amounts under $10 that do not trigger a Form 1099-INT.
  • Your bank sends Form 1099-INT only when interest reaches $10 or more, but the reporting requirement exists regardless of whether you receive the form.
  • Interest is taxed as ordinary income at your regular tax rate, not at a special rate.
  • If your bank reports interest to the IRS and you do not report it on your return, the IRS will notice the mismatch and may contact you.

How the IRS knows about your interest income

Banks report interest payments to both you and the IRS using Form 1099-INT. Your bank mails you a copy by January 31 each year for any interest earned in the prior calendar year. The bank also files a copy with the IRS under your Social Security number or tax ID.

The IRS matches the 1099-INT forms it receives from banks against the income you report on your tax return. If you earn $15 in interest and your bank reports it but you do not include it on your return, the IRS will see the discrepancy. This can trigger a notice asking you to explain the difference or pay the tax owed plus penalties and interest.

Even if you earn less than $10 and your bank does not send you a 1099-INT, you are still required to report the interest. The absence of a form does not mean the income is not taxable.

Where to report interest income on your tax return

On the federal return, interest income goes on Schedule B (Interest and Ordinary Dividends) if you file Form 1040. You list each account separately and add up the total interest earned. The total then transfers to your main tax return.

If you use tax software, the program will ask you to enter interest income and automatically place it in the correct location. If you file by hand or work with a tax preparer, they will know to use Schedule B.

State tax returns also require you to report interest income if your state has an income tax. The location varies by state — some states use a form similar to Schedule B, while others ask for the information directly on the main return.

What happens if you miss reporting interest income

If the IRS discovers unreported interest income through a 1099-INT mismatch, you will receive a notice. The IRS will calculate the tax you owe on that income plus a failure-to-pay penalty (usually 0.5% per month of the unpaid tax) and interest on the unpaid amount. The interest rate compounds daily and changes quarterly.

If the unreported amount is small — a few dollars in interest — the IRS may not pursue it aggressively, but the risk exists. The safest approach is to report all interest, even tiny amounts, when you file.

If you discover you missed reporting interest in a prior year, you can file an amended return (Form 1040-X) for that year. Filing an amended return voluntarily before the IRS contacts you may reduce or eliminate penalties, though you will still owe the tax and interest on the unpaid amount.

Interest from different account types

All interest is reported the same way regardless of the account type. A regular savings account, high-yield savings account, money market account, and CD all generate interest that must be reported on Schedule B. The rate of interest does not change the reporting requirement — a 4% APY account and a 0.01% APY account are both reported the same way.

Interest from joint accounts is split between the account owners based on each person's ownership stake. If you and your spouse own a joint account equally, you each report half the interest. Your bank may issue separate 1099-INT forms to each owner, or it may issue one form to the primary account holder, in which case you will need to divide the amount yourself when you report it.

If you are the custodian of a minor's savings account, the interest is taxable to the minor, not to you. The minor must report it on their own tax return (or their parents may report it on theirs if the minor does not file). Your bank will issue the 1099-INT in the minor's name and Social Security number.

Tax-advantaged accounts that do not require interest reporting

Interest earned inside a Roth IRA or traditional IRA is not reported on your annual tax return. The interest compounds tax-free inside the account (or tax-deferred in a traditional IRA). You only report income from these accounts if you withdraw money before retirement age or fail to follow the account rules.

Interest in a 529 college savings plan is also not reported annually. Like IRAs, the earnings grow without annual tax reporting. You report income only when you withdraw money for non-may have access to expenses.

A regular savings account does not have these protections. Interest is always taxable in the year it is earned, even if you do not withdraw the money.

Frequently Asked Questions

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

Yes. The $10 threshold only determines whether your bank sends you a Form 1099-INT. You must report all interest income on your tax return regardless of the amount. If you earned $3 in interest, you report $3.

What if my bank made a mistake on the 1099-INT and reported the wrong amount?

Contact your bank and ask them to issue a corrected form (Form 1099-INT with a "CORRECTED" box marked). 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 to match the corrected 1099-INT.

Can I deduct savings account fees from the interest I report?

No. You report the full interest amount on Schedule B. Savings account fees are not deductible on your personal tax return. You pay tax on the gross interest, then pay the fees separately from your account balance.

If I move money between savings accounts, do I report interest twice?

No. You report interest based on where the money was held and which bank paid it. If you transfer $5,000 from Bank A to Bank B mid-year, Bank A reports the interest it paid while the money was there, and Bank B reports the interest it paid after you moved the money. You add both amounts together on your return, but you are not double-counting.

What if I had a savings account that closed during the year?

You still report the interest earned before the account closed. Your bank will issue a 1099-INT for the interest paid up to the closing date. Report it the same way you would for an active account.