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IRS Form 1099-INT: Interest Income
Understand IRS Form 1099-INT, which reports interest income from bank accounts, CDs, bonds, and other sources. Learn how rising rates have made this form.
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Understand IRS Form 1099-INT, which reports interest income from bank accounts, CDs, bonds, and other sources. Learn how rising rates have made this form.
This guide is designed for first-pass understanding. Start with core terms, then apply the framework in your own account workflow.
IRS Form 1099-INT reports interest income you earned during the tax year from bank accounts, certificates of deposit, money market accounts, bonds, and other interest-bearing instruments. It is one of the oldest and most common information returns in the tax system. After years of near-zero interest rates made this form an afterthought, the high-rate environment of 2023 and 2024 turned 1099-INT into a meaningful line item on millions of tax returns once again.
Interest income reporting predates most modern 1099 forms. The obligation for banks and financial institutions to report interest payments to the IRS has been part of the tax code for decades, and Form 1099-INT has been the standard vehicle for this reporting since its introduction. The reporting threshold of $10 has remained unchanged for as long as most taxpayers can remember; a threshold that has never been adjusted for inflation, meaning it captures far more accounts today than when it was originally set.
For much of the 2010s and early 2020s, 1099-INT was practically invisible to most taxpayers. With the federal funds rate near zero from 2009 through 2015 and again from 2020 through early 2022, savings accounts and CDs paid fractions of a percent. A $50,000 savings account might earn $5 in a year; below the reporting threshold. Many people went years without receiving a 1099-INT at all.
That changed dramatically when the Federal Reserve began its aggressive rate-hiking cycle in 2022. By mid-2023, high-yield savings accounts were offering 4.5% to 5.5% APY, and short-term CDs were paying similar rates. Suddenly, the same $50,000 savings account was generating $2,500 or more in annual interest. For taxpayers with larger cash holdings — emergency funds, down payment savings, or proceeds from home sales sitting in money markets — the interest income became substantial enough to affect their tax bracket.
Form 1099-INT is filed by the payer of the interest; banks, credit unions, brokerages, corporations, and government entities that paid you $10 or more in interest during the year. U.S. savings bond interest (reported when the bond is redeemed or matures) and certain other forms of interest may have different reporting triggers but still appear on the 1099-INT.
The form must be provided to recipients by January 31 of the following year. If you have accounts at multiple banks, you will receive a separate 1099-INT from each one. Brokerage firms that hold cash or bonds on your behalf will include interest income on their consolidated 1099 statement, which may arrive later; typically by mid-February.
Interest income is reported on Schedule B of your Form 1040 if your total interest exceeds $1,500. If it is $1,500 or less, you can report it directly on Form 1040, line 2b. All interest income is taxed as ordinary income at your marginal tax rate, with the exception of tax-exempt interest from municipal bonds.
Most interest income is taxable at the federal level. However, interest from municipal bonds is generally exempt from federal income tax and may also be exempt from state tax if the bond was issued in your state. Treasury bond interest is taxable at the federal level but exempt from state and local taxes. These tax-exempt amounts are reported in Boxes 8 and 9 of your 1099-INT.
Yes. Banks are only required to issue a 1099-INT if they paid you $10 or more in interest during the year. However, you are legally obligated to report all interest income, regardless of the amount. Check your bank and brokerage statements for small interest amounts that fell below the reporting threshold.
If your state tax refund included interest because the refund was delayed, that interest is reported on a 1099-INT. This is separate from the refund itself (reported on 1099-G). The interest is fully taxable as ordinary income regardless of whether the underlying refund is taxable.
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IRS Form 1099-OID: Original Issue Discount
Box 1; Interest income. The total taxable interest paid to you during the year. This is the primary number you will report on your tax return. It includes interest from savings accounts, checking accounts, CDs, money market accounts, corporate bonds, and U.S. Treasury securities (though Treasuries have special state tax treatment; see below).
Box 2; Early withdrawal penalty. If you broke a CD before its maturity date and the bank charged an early withdrawal penalty, the penalty amount appears here. This penalty is deductible as an adjustment to income on Schedule 1, line 18 of Form 1040; you can deduct it even if you take the standard deduction. Many taxpayers overlook this deduction.
Box 3; Interest on U.S. Savings Bonds and Treasury obligations. Interest from U.S. Treasury bills, notes, bonds, and savings bonds (Series EE and Series I). This interest is subject to federal income tax but is exempt from state and local income tax. If you live in a high-tax state, this exemption can be valuable. You need to identify this amount when preparing your state return to claim the exclusion.
Box 4; Federal income tax withheld. If backup withholding was applied to your interest payments; typically because you did not provide a correct Taxpayer Identification Number (TIN); the withheld amount appears here. This is relatively uncommon for most account holders.
Box 8; Tax-exempt interest. Interest from municipal bonds that is exempt from federal income tax. While you do not owe federal tax on this income, it must still be reported on your return (Form 1040, line 2a). Tax-exempt interest can also affect other calculations, including the taxability of Social Security benefits and eligibility for certain credits. Some municipal bond interest may also be subject to the Alternative Minimum Tax (AMT), which would appear in Box 9.
Box 10; Market discount. If you purchased a bond at a price below its face value and sold it or it matured during the year, the accrued market discount may be treated as ordinary income rather than capital gain. This is a technical area that affects bond traders and investors who buy bonds on the secondary market.
Box 13; Bond premium. If you purchased a taxable bond at a price above its face value, the premium can be amortized to reduce your interest income each year. This is an election you make, and the amortized amount reduces the interest reported in Box 1. If you do not elect to amortize, the premium reduces your gain (or increases your loss) when the bond is sold or matures.
Forgetting about interest from high-yield savings accounts. Many taxpayers opened high-yield savings accounts at online banks to capture the higher rates available in 2023 and 2024. If this was a new account at a bank you do not typically use, you might not be watching for the 1099-INT. The IRS, however, has it on file. Make sure to collect 1099-INT forms from every institution where you earned interest.
Missing the early withdrawal penalty deduction. Box 2 contains a valuable above-the-line deduction that reduces your adjusted gross income. Unlike most deductions, you do not need to itemize to claim it. If you broke a CD and paid a penalty, make sure this amount makes it onto your Schedule 1.
Not reporting tax-exempt interest. Even though municipal bond interest (Box 8) is not taxable at the federal level, it must still be reported on your return. The IRS uses this information for various calculations, and omitting it can trigger a notice. Also, if you live in a state other than the state that issued the municipal bonds, the interest may be subject to your state's income tax.
Overlooking the state tax exemption for Treasury interest. Interest on U.S. Treasury securities (Box 3) is exempt from state and local taxes. If your state has an income tax, you need to subtract this amount on your state return. Many taxpayers fail to do this and overpay their state taxes. For someone earning $5,000 in Treasury interest in a state with a 6% tax rate, that is $300 in unnecessary state tax.
Ignoring Series I Bond interest timing. Series I Bonds (I Bonds) accrue interest but do not pay it out until the bond is redeemed. Most holders choose to defer reporting the interest until redemption, at which point the entire accumulated interest appears on a single 1099-INT. If you redeemed I Bonds purchased years ago, the interest amount can be surprisingly large. You can alternatively elect to report I Bond interest annually, but you must be consistent once you make this election.
The most significant recent development affecting 1099-INT is the high interest rate environment. After the Federal Reserve raised its benchmark rate to a range of 5.25% to 5.50% by mid-2023, the highest level in over 22 years, interest income became meaningful again for millions of savers. High-yield savings accounts, money market funds, and short-term Treasury bills all generated substantial taxable interest.
This rate environment also drove massive inflows into money market funds and Treasury securities, with many investors parking cash in these instruments for the first time. First-time recipients of 1099-INT forms may be unfamiliar with the reporting requirements and the tax implications of their interest income.
The IRS has continued to refine its automated matching systems. Every 1099-INT filed by a bank is matched against the recipient's tax return. If you earned interest but did not report it, you will receive a CP2000 notice proposing additional tax. The best practice is to wait until you have received all expected 1099-INT forms before filing, especially if you have accounts at multiple institutions.
Clarity connects to your bank and brokerage accounts and tracks interest income as it accrues throughout the year. Instead of waiting until January to find out how much interest you earned, you can see your running total in real time and estimate the tax impact before the year ends.
For investors holding Treasury securities, municipal bonds, and taxable bonds across multiple accounts, Clarity provides a consolidated view of interest income by type — taxable, tax-exempt, and state-exempt — making it easier to prepare both your federal and state returns accurately.
Clarity also helps you identify opportunities to optimize your interest income. By categorizing interest by tax treatment across all your accounts, you can make informed decisions about where to hold cash and fixed-income investments based on their after-tax yield rather than their headline rate.
For more details, see the official IRS page for Form 1099-INT.
This article is educational and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.
Understand IRS Form 1099-OID, which reports phantom income from bonds purchased below face value. Learn how original issue discount works and when you owe.