A 1099-INT reports interest you earned, and the IRS treats it as ordinary income

A 1099-INT is a form that banks, credit unions, brokerages, and other financial institutions send you when you earned $10 or more in interest during the year. The form lists every source of interest income — savings accounts, money market accounts, certificates of deposit, bonds held outside retirement accounts, and even interest paid on tax refunds. Unlike capital gains (which come on a 1099-B when you sell an investment), interest is taxed as ordinary income, meaning it's added to your wages or self-employment earnings and taxed at your regular tax rate, not a lower capital gains rate.

You receive a 1099-INT by January 31 of the year following the year you earned the interest. The financial institution also sends a copy to the IRS, so the IRS already knows about this income before you file. If you don't report it on your tax return, the IRS will notice the mismatch and may send you a notice or bill you for unpaid tax plus penalties.

Key Takeaways

  • Interest income of $10 or more from a single source must be reported to you on a 1099-INT, and you must report it on your federal tax return as ordinary income.
  • Interest is taxed at your full ordinary income tax rate, not at the lower capital gains rate, so even small amounts of interest can increase your tax bill.
  • The IRS receives a copy of every 1099-INT issued, so unreported interest will likely trigger a notice or adjustment.
  • You report 1099-INT interest on Schedule 1 (Form 1040) or on your business return if the interest relates to a business account.

Where 1099-INT interest comes from

The most common source is a savings or money market account at a bank or credit union. As interest rates have risen in recent years, even modest savings balances generate reportable interest. A savings account with $50,000 earning 4% annually will generate $2,000 in interest — well above the $10 reporting threshold.

Certificates of deposit (CDs) also generate 1099-INT forms. If you hold a CD outside a retirement account and it matures during the year, you'll receive a 1099-INT for the interest earned, even if you when ready roll the money into a new CD. Bond interest from corporate or government bonds held in a taxable brokerage account appears on a 1099-INT (though some brokerages may use a 1099-OID for original issue discount bonds). Interest paid on a federal tax refund — rare, but it happens when the IRS takes months to process your return — also shows up on a 1099-INT.

Interest earned inside retirement accounts (IRAs, 401(k)s, Roth accounts) does not generate a 1099-INT because that interest is tax-deferred or tax-free, depending on the account type. The financial institution holding the retirement account does not report the internal interest to the IRS.

How interest income differs from capital gains

Interest and capital gains are both investment income, but they're taxed very differently. Capital gains are profits you make when you sell an investment for more than you paid for it — they come on a 1099-B and may may have access to for lower tax rates if you held the investment for more than one year. Interest income is money paid to you for lending money (or for holding cash), and it's always taxed as ordinary income at your full tax rate, regardless of how long you held the account.

This matters because your tax bracket determines how much you pay on interest. If you're in the 24% tax bracket, every $1,000 in interest costs you $240 in federal tax. The same $1,000 in long-term capital gains might cost you only $150 (at the 15% long-term capital gains rate) or even $0 if your income is low enough to may have access to for the 0% rate. Interest has no preferential rate — it's treated the same as wages or self-employment income.

Where to report 1099-INT on your tax return

If you file Form 1040 (the standard individual income tax return), you report 1099-INT interest on Schedule 1, Part I, line 8 (labeled "Interest"). Add up all the 1099-INT forms you received and enter the total. This amount then flows to your Form 1040 and is added to your other income.

If you're self-employed and the interest relates to a business account — for example, interest on a business savings account or a loan you made to a customer — you may report it on your Schedule C (business income and loss) instead. Most people, though, report 1099-INT interest on Schedule 1 because it's personal savings or investment interest, not business income.

You do not need to attach the 1099-INT forms to your return, but you should keep them for your records. The IRS has already received its copy, so it will match the total you report against what the financial institutions reported.

When you receive multiple 1099-INT forms

If you have accounts at several banks or hold multiple CDs or bonds, you'll receive a separate 1099-INT from each institution. You must add up the interest from all of them and report the total on Schedule 1. The IRS will receive all those individual forms and will verify that your reported total matches the sum of what was sent to them.

Some people worry about "double reporting" when they receive multiple forms, but there's no such thing. You report the total interest once, on one line of your return. The IRS's computer system automatically reconciles the individual 1099-INT forms with your return total.

If you receive a 1099-INT and believe it's wrong — for example, the amount doesn't match your records — contact the financial institution and ask them to issue a corrected form (a 1099-INT marked "CORRECTED"). They'll send the corrected version to you and to the IRS. Do not ignore the error and report a different number on your return; the mismatch will trigger an IRS notice.

Interest income and your tax bracket

Interest income is "stacked" on top of your other income when calculating your tax. If you earn $60,000 in wages and receive $5,000 in interest, the IRS treats you as having $65,000 in income. This can push you into a higher tax bracket or reduce tax credits you might otherwise claim — for example, the Earned Income Tax Credit or education credits phase out as income rises.

This stacking effect is one reason some people move money into retirement accounts or tax-advantaged savings accounts (like 529 plans for education or Health Savings Accounts for medical expenses). Interest earned inside these accounts doesn't generate a 1099-INT and doesn't increase your taxable income in the current year.

Frequently Asked Questions

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

No. Financial institutions are not required to send you a 1099-INT if you earned less than $10 in interest from that source. However, you are still legally required to report all interest income on your tax return, even if you don't receive a form. If you earned $3 in interest and no 1099-INT was issued, you should still report it on Schedule 1.

What if my bank didn't send me a 1099-INT but I earned interest?

Contact the bank and ask them to issue one. If they confirm you earned $10 or more and they failed to send a form, they should issue it when ready. If you earned less than $10, the bank is not required to send a form, but you should still report the interest on your return. Keep your account statements as proof of the amount.

Is interest from a savings account taxed differently if it's in a joint account?

The 1099-INT will be issued to the person whose Social Security number is on file with the bank, usually the account owner. If the account is joint, only one person receives the form. That person is responsible for reporting the interest, though they may split it with the co-owner for their own record-keeping. The IRS only sees one 1099-INT, so only one person should report it on their tax return.

Can I deduct interest I paid on a loan from interest I earned?

No. Interest you earned (1099-INT) is income you must report. Interest you paid on a loan is generally not deductible unless it's mortgage interest (on a home loan) or student loan interest (up to $2,500 per year). You cannot net them against each other on your return.

What happens if I don't report my 1099-INT interest?

The IRS will receive a copy of the form and will notice that you didn't report it. They will likely send you a notice proposing to add the unreported interest to your income and bill you for the additional tax, plus penalties and interest on the unpaid amount. It's much simpler to report it when you file.