Savings Account Interest Taxes: What You Owe

Do I have to pay tax on interest from a savings account?

In most cases, yes. Interest you earn from a savings account is generally considered taxable income at the federal level, even if you leave the money in the account and don’t withdraw it. Banks typically report the interest you earned for the year on Form 1099-INT (often issued when interest is at least $10), and you’re expected to include that amount on your tax return.

How savings account interest is taxed

Savings interest is usually taxed as ordinary income, meaning it’s taxed at your regular income tax rate rather than a special lower rate. The amount of tax you owe depends on your total income and filing status. If you have multiple accounts, you generally add up all taxable interest across them.

State income taxes may apply too, depending on where you live. Some states tax interest income, while others do not have an income tax or treat certain types of interest differently.

When you might not owe tax

You may not end up owing additional tax if your total income is low enough to fall below filing thresholds, or if your deductions and credits reduce your tax to zero. However, the interest itself is still typically taxable income; it’s just that your overall tax situation might mean no tax is ultimately due.

Also, interest from certain government bonds can receive special treatment, but that’s different from standard bank savings account interest.

What to do at tax time

Look for Form 1099-INT from your bank (or download it from online banking). If you don’t receive one, you’re still responsible for reporting interest you earned. Keeping an eye on monthly statements can help you confirm totals, especially if you switched banks or opened new accounts during the year.

For more details and examples, visit the full guide on savings account interest taxes.

FAQ

Do I have to report savings interest if I didn’t get a 1099-INT?

Yes. Even if the bank doesn’t issue a 1099-INT (often because the amount was under $10), taxable interest is still required to be reported on your return.

Recommended for you

Saving Smarter: The Essential Guide to Paying Tax on Your Savings – How Do You Pay Tax on Savings Explained

$24.99View product

Bright Side Thinking: A Simple Guide to Positive Thoughts – How to Have Positive Thoughts Every Day

$10.99View product