Yes, you must report all savings account interest to the IRS, even small amounts
The IRS requires you to report every dollar of interest your savings account earns, with no minimum threshold. If your bank paid you interest during the year, that income belongs on your tax return. The bank will send you a Form 1099-INT in January showing what you earned, and the IRS receives a copy of that same form. Filing without reporting the interest creates a mismatch the IRS will catch.
The only exception is interest that is explicitly tax-exempt by law — mainly interest from certain municipal bonds. Regular savings account interest is never tax-exempt. Even if you earned only $2 in interest, you report it.
Where you report it depends on your filing method and the total amount. On a paper 1040, interest goes on Schedule 1. If you use tax software, you enter the 1099-INT information when prompted, and the software places it in the correct location automatically.
Key Takeaways
- All savings account interest must be reported to the IRS, regardless of the amount — there is no minimum threshold.
- Your bank sends you Form 1099-INT by January 31 each year, and the IRS receives a matching copy.
- Interest income is reported on Schedule 1 (Form 1040) or entered directly into tax software.
- Failing to report interest creates a discrepancy the IRS will identify when it matches your return against the 1099-INT they received from your bank.
- Interest from regular savings accounts, money market accounts, and CDs is always taxable; only certain municipal bond interest is exempt.
How the IRS knows about your interest income
Banks are required to file Form 1099-INT with the IRS for any account holder who earned $10 or more in interest during the calendar year. Your bank mails you a copy by January 31, and sends an identical copy to the IRS. The IRS then cross-checks the interest reported on your tax return against the 1099-INT they received from the bank.
If you report less interest than the 1099-INT shows, or omit it entirely, 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 and send you a bill. Either way, underreporting interest is not a matter of hoping the IRS does not notice — the matching system is automated and catches nearly all cases.
Some people think that if they earned less than $10, they do not have to report it because the bank did not send a 1099-INT. That is incorrect. You must report all interest income, even if the bank did not issue a form. The $10 threshold only determines whether the bank files with the IRS, not whether you must report it on your return.
Where to report interest on your tax return
If you file Form 1040 on paper, interest income goes on Schedule 1, Part I, line 8. You add up all interest from all sources (savings accounts, CDs, money market accounts, bonds) and enter the total. Attach Schedule 1 to your Form 1040.
If you file electronically using tax software, you enter the information from your 1099-INT forms when the software prompts you. Most programs ask you to input the payer's name, the account number, and the interest amount. The software then automatically places the total in the correct location on your return.
If you have multiple accounts at different banks, you report the combined total, not each account separately. For example, if you have $45 in interest from one bank and $38 from another, you report $83 total on line 8 of Schedule 1.
What happens if you miss reporting interest
The IRS will likely discover the omission when it receives the 1099-INT from your bank and compares it to your return. The most common outcome is a CP2000 notice, which the IRS sends to your address on file. This notice shows the interest the IRS received from your bank and asks you to either agree with the adjustment or explain why the amounts differ.
If you agree (or do not respond within 30 days), the IRS assesses additional tax on the unreported interest, plus interest on that tax, calculated from the original due date of your return. You will receive a bill. If the amount is small, the bill may be modest, but the IRS will still pursue it.
If you intentionally omit interest income as part of a pattern of underreporting, the IRS may impose penalties for accuracy-related issues or fraud, depending on the circumstances. The safest course is to report all interest, even if the amount is tiny.
Interest from different account types
All interest from deposit accounts is taxable and must be reported. This includes savings accounts, money market accounts, certificates of deposit (CDs), and interest-bearing checking accounts. The type of account does not matter — if it earned interest, you report it.
Interest from bonds and bond funds is also taxable, with one important exception: interest from municipal bonds issued by states, cities, and other local governments is generally exempt from federal income tax. If you own municipal bonds, the interest is not reported on your federal return. However, you still report interest from corporate bonds, U.S. Treasury bonds, and savings bonds on Schedule 1.
If you are unsure whether a bond is municipal, check the 1099-INT or the bond documentation. The form will indicate if the interest is tax-exempt. If you own a mutual fund that holds municipal bonds, the fund will issue a separate statement showing tax-exempt interest separately from taxable interest.
Reporting interest when you file jointly or separately
If you file a joint return with a spouse, you combine all interest from both spouses' accounts and report the total on one Schedule 1. The interest does not need to be split between you — it all goes on the joint return.
If you file separately, each spouse reports only their own interest income. If an account is held jointly, you and your spouse must decide how to split the interest. Many couples split it 50/50, but you can split it differently if you both agree and keep records of the arrangement. The bank's 1099-INT will show the full amount to one or both of you, so be prepared to explain the split if the IRS asks.
If you are a dependent on someone else's return, you still report your own interest income on your own return (if you file one). Your parents or guardians do not report your interest on their return.
Interest earned but not yet received
You report interest in the year you earn it, not necessarily the year you receive it. For most savings accounts, interest is credited to your account monthly or quarterly, so you earn and receive it in the same year. However, some accounts or investments credit interest only at maturity or on a specific date.
For example, if you buy a CD that matures in January and credits all interest at that time, you report the interest in the year the CD matures, even if you purchased it in the previous year. The 1099-INT you receive will show the year the interest was credited to your account.
If you close an account mid-year, the bank includes all interest earned up to the closing date on the 1099-INT for that year. You report it on that year's return, not deferred to the next year.
Frequently Asked Questions
Do I have to report interest if I earned less than $10?
Yes. The $10 threshold only determines whether your bank files a 1099-INT with the IRS, not whether you must report the interest. You report all interest income on your tax return, regardless of amount. The IRS still knows about it because you are required to report all income.
What if my bank sent me a 1099-INT but I think the amount is wrong?
Contact your bank and ask them to verify the calculation. If the bank made an error, they will issue a corrected 1099-INT (marked as a correction). Once you receive the corrected form, report the correct amount on your return. Keep the corrected form with your tax records.
Can I deduct expenses to offset my interest income?
No. Interest income is reported as-is on Schedule 1; you cannot deduct account fees, investment advisory costs, or other expenses against it. Those expenses may be deductible elsewhere on your return (if they meet other requirements), but not as an offset to interest income.
What if I have interest from a foreign bank account?
You still report it on Schedule 1 like any other interest income. If you have a foreign financial account with more than $10,000 at any time during the year, you may also be required to file FinCEN Form 114 (FBAR). Consult a tax professional if you have foreign accounts, as additional reporting rules may apply.
Do I report interest if I am not filing a tax return?
If you are not required to file a return based on your income, you do not file one. However, if you have any tax filing requirement — even a small one — you must report all interest income on that return. If you are unsure whether you must file, use the IRS filing requirements tool on irs.gov or consult a tax professional.