What Is the Minimum Reportable Interest Income on a Bank Account Reportable to IRS?

Generally, the Internal Revenue Service considers interest on savings accounts, money markets, certificates of deposits and other bank products to be taxable income, and levies taxes at ordinary income rates.

Mimimum Amounts

The IRS requires you to list all interest income from all sources on your tax returns. You must file a return if your unearned income, which includes interest, was over $950 or your earned income was over $5,700. Each financial institution should send you a Form 1099-INT or OID. However, you must report all interest income subject to tax even if you never received the forms.

Dividends that Are Taxed as Income

There are a number of payments typically referred to as "dividends" that the IRS considers to be interest: dividends from cooperative banks and credit unions, mutual savings banks, federal and domestic savings and loan associations and domestic building and loan associations. Dividends received from life insurance policies, however, are not taxable.

How to Report Interest Income

You must report all taxable interest income on Form 1040 or 1040A, on line 8a, or on Form 1040EZ, line 2. You can use 1040EZ if you have no dependents and only one job and do not wish to itemize deductions. However, you cannot use 1040EZ if you have more than $1,500 in interest income from all sources, you are claiming the interest exclusion under the Education Savings Bond program, you owner-financed a mortgage to someone living in the property, you received interest belonging to another as a nominee, or you got a Form 1099-INT on frozen deposits or on a bond that you bought between interest payment dates. In these cases, you must also file a Schedule B.

Rules for CDs

If you purchase a certificate of deposit with a maturity longer than a year, you must include part of the interest in your income on your return. The same applies to savings certificates, time deposits, growth savings certificates, bonus savings certificates and bonus plans.

Retirement Plans

If you hold your account within a tax-advantaged retirement savings vehicle such as an IRA, you do not need to include the interest as taxable income.

References

• IRS Publication 550 - Investment Inome and Expenses

Resources

• IRS: Tax Topic 403 - Interest Received