Aug 14 · 2 min read
Even though you might not view a checking or savings account as a source of income, you won’t be able to pocket the interest from them tax-free. Unfortunately, If you’ve earned any interest from these accounts, you’ll have to report it as income on your taxes. Your interest will be taxed at your marginal tax rate or in other words, the highest tax bracket you fall into. At the beginning of every year, your bank will send you tax forms that summarize your total interest earned from the previous year. You can typically choose to get these forms mailed to you or even to receive them as an electronic copy.
Tax forms vary by country, but in the U.S., Form 1099-INT will be sent to anyone who earns more than $10 in interest. Form 1099-INT summarizes your interest earned, allowing you to easily report it to the IRS.
If you earn less than $10 in interest, you won’t get a Form 1099-INT from your bank but you will still have to report this interest as income. You can do this by reporting your interest as if you actually received a 1099-INT for this account.
For instance, if you’ve earned $5 in interest from a high-yield savings account with Whyze Bank, you can fill out a blank 1099-INT form summarizing how much interest you earned. Generally, you would just need to put “Whyze Bank” as the Payer and “$5” in Box 1.
If you happen to have multiple accounts that accrue interest, you will receive these forms from each one with interest earned above $10.
As an example, if you have a high-yield savings account and a money market account that have each earned you $100 in interest, you will receive tax forms from both. Both 1099-INT forms will need to be included in your tax filing.
Whether you file your own taxes or let a professional handle them, you’ll want to make sure you file your 1099-INT forms each year you earn interest. This will keep you on track with your financial goals while keeping you out of trouble with the government.