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

The IRS requires you to report every dollar of interest your savings account earns. There is no minimum threshold — even $1 in interest must be reported. Banks send you a Form 1099-INT each January if your account earned $10 or more in interest during the previous year, but you are required to report the interest whether or not you receive the form.

Interest counts as taxable income. The bank reports it to the IRS under your Social Security number, so if you do not report it and the IRS cross-checks the forms they receive, you will face penalties and interest charges on the unpaid tax. The safest approach is to report what the bank reports to you, or if you earned less than $10 and did not receive a 1099-INT, report the actual interest shown in your account statements.

Key Takeaways

  • All savings account interest is taxable income and must be reported on your federal return, regardless of the amount.
  • Banks issue Form 1099-INT only when interest reaches $10 or more, but you still owe tax on smaller amounts if you earned them.
  • The interest appears on Schedule B (Form 1040) if you have more than $1,500 in total interest and dividend income, or on the main form if you have less.
  • State income tax rules vary — some states tax savings interest, others do not, so check your state's requirements separately.
  • If you did not receive a 1099-INT but earned interest, use your bank statements to report the correct amount.

Where to report the interest on your return

The location depends on your total interest and dividend income for the year. If your combined interest and dividends are $1,500 or less, you report the interest directly on the main page of Form 1040 (line 2b). If your combined interest and dividends exceed $1,500, you must use Schedule B and attach it to your return.

Schedule B asks you to list each account separately if you received a 1099-INT for it. If you earned interest but did not receive a 1099-INT (because it was under $10), you can list it as "Other" on Schedule B or on the main form, depending on your total. The IRS matches what you report against the 1099-INT forms banks send them, so accuracy matters.

How the IRS knows about your interest

Banks are required to send both you and the IRS a copy of Form 1099-INT when interest reaches $10 in a calendar year. The form shows your name, Social Security number, the bank's name, and the interest amount. The IRS receives an electronic copy and cross-checks it against your tax return.

If you report less interest than the 1099-INT shows, or if you do not report it at all, the IRS computer system flags the discrepancy. You may receive a notice asking you to explain the difference, or the IRS may simply assess additional tax, penalties, and interest on the unreported amount. Reporting what the bank reports avoids this problem entirely.

What counts as interest you must report

Interest includes the earnings your bank pays you for keeping money in a savings account, money market account, or certificate of deposit (CD). It also includes interest from bonds, Treasury bills, and other investments that pay interest rather than dividends. If the bank paid you interest, it counts.

Some accounts pay interest in the form of a bonus deposit rather than traditional interest. If the bank calls it a bonus but it is actually compensation for keeping your money there, it may still be taxable interest. Your bank statement or the 1099-INT will clarify what the bank considers interest. When in doubt, ask the bank whether a payment is interest or a non-taxable promotional bonus.

State income tax reporting requirements vary

Federal law requires you to report all savings interest, but state rules differ. Most states that have an income tax also tax savings interest the same way the federal government does. However, a few states — including Pennsylvania, Illinois, and Mississippi — do not tax interest income at all, or exempt it under certain conditions.

Check your state's tax agency website or your state income tax form instructions to learn whether your state taxes savings interest. If you live in a state that does not tax it, you still must report it to the IRS, but you would not include it on your state return. If you moved during the year, you may owe tax to both your old state and your new state, depending on when you moved and each state's rules.

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

If you earned less than $10 in interest, your bank is not required to send you a 1099-INT. You are still required to report the interest on your return. Log into your online banking account or request a statement from the bank showing the interest earned during the year. Add that amount to your return on Schedule B or the main form, depending on your total interest and dividend income.

If you earned $10 or more and did not receive a 1099-INT by early February, contact the bank and ask them to send it or provide a corrected form. If the bank made an error and reported the wrong amount, ask for a corrected 1099-INT (marked "Corrected" on the form). You will then file an amended return if necessary to match the corrected amount.

Interest from joint accounts and accounts held for others

If you own a savings account jointly with another person, the bank typically reports all the interest to both owners' Social Security numbers, or splits it between you. Check the 1099-INT to see how much the bank assigned to you. Report only the amount shown on your copy of the form.

If you hold an account as a custodian or trustee for a minor or another person, the interest may belong to that person, not to you. Custodial accounts for minors often require the child to report the interest on their own return (or their parents' return if the child does not file). Consult a tax professional if you are unsure who should report the interest, because reporting it on the wrong return can trigger IRS notices to both parties.

Frequently Asked Questions

Do I have to report interest if I only earned a few dollars?

Yes. The IRS has no minimum threshold for reporting interest income. Even $1 in interest must be reported on your federal return. Banks only send a 1099-INT when interest reaches $10, but that does not mean smaller amounts are tax-free — you are still required to report them using your bank statements.

What happens if I forget to report savings interest?

The IRS will likely discover the omission when they cross-check the 1099-INT forms banks send them against your return. You may receive a notice proposing additional tax, penalties, and interest charges. The penalty for underreporting is typically 20% of the unpaid tax, plus interest that compounds daily. Filing an amended return as soon as you realize the mistake can reduce penalties.

Can I deduct expenses to offset savings interest?

No. Interest income is reported in full, and you cannot deduct account fees, investment advisory costs, or other expenses against it on your personal return. The interest is taxable regardless of fees the bank charged you. However, if you are self-employed or a business owner, business-related interest expenses may be deductible under different rules.

Do I report interest from a high-yield savings account differently?

No. High-yield savings accounts earn more interest than traditional savings accounts, but the interest is reported the same way — on Form 1099-INT if it reaches $10, and on Schedule B or the main form of your return. The tax treatment is identical; only the amount differs.

What if my bank reported the wrong interest amount on the 1099-INT?

Contact the bank and ask them to issue a corrected 1099-INT marked "Corrected." Once you receive it, file an amended return (Form 1040-X) reporting the correct amount. Send a copy of the corrected 1099-INT with your amended return. The IRS will update their records to match the correction.