What Is The Minimum Amount of Interest Required to Report?

See when the interest you earned on savings accounts and other deposits have to be declared on taxes, even if you did not receive a Form 1099-INT.
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woman sit and writing on paper at bank

It’s tax time. You have your tax forms in front of you, including 1099-INT forms reporting the interest you earned from bank and investment accounts.

Looking at those forms, it occurs to you that some of the amounts on them are very small. Or maybe you have an account or two for which you did not receive a 1099-INT.

Do you really have to declare tiny amounts of interest or chase down missing 1099s?

The short answer is yes. If you meet the requirements for filing a tax return, you should declare any interest earned on your tax return – no matter how small, even if you didn’t receive a Form 1099-INT.

The filing requirements are discussed below, but that doesn’t necessarily answer the underlying question: Is it worth bothering with all of this?

Earn More Interest

Research by MoneyRates.com shows that most bank customers are getting a small fraction of the interest they could be earning on their deposits.

Even in a falling rate environment, it is possible for many savers to earn more interest.

So beyond getting your taxes done, the next financial move you should make is to see why some of those interest amounts are so small and find ways to do better this year.

Investing four minutes of your time to shop for rates today could yield more meaningful earnings to report next year and some satisfaction, knowing you took proactive steps instead of settling for a minimal return on your deposits.

Who Is Required to File a Tax Return?

The following rules cover most taxpayers, assuming you cannot be claimed as a dependent on someone else’s return:

If your filing status is… And at the end of 2019 you were… Then file a return if your gross income was at least…
Single Under 65 $12,200
Single 65 or older $13,850
Head of household Under 65 $18,350
Head of household 65 or older $20,000
Married filing jointly Under 65 (both spouses) $24,400
Married filing jointly 65 or older (one spouse) $25,700
Married filing jointly 65 or older (both spouses) $27,000
Married filing separately Any age $5
Qualifying widow(er) Under 65 $24,400
Qualifying widow(er) 65 or older $25,700

However, if you are self-employed, the reporting threshold is much lower. You have to file a return if you had at least $400 in self-employment income.

Note that, even if you do not meet any of the above filing thresholds, it may be worthwhile to file a return:

  • So you can collect any refunds owed to you on taxes withheld from your paycheck
  • So you can collect any refunds owed to you on estimated taxes you paid throughout the year
  • In case you qualify for a tax credit

If you do file a return, do you have to report every bit of interest income you earn on savings accounts, certificates of deposits, checking accounts and bonds, no matter how small?

The answer is yes. The tricky part is that financial institutions are only required to send you a 1099-INT if you had at least $10 in interest income from that institution.

If you did not get a 1099-INT, you should be able to find out how much interest your account earned by checking your statements from the past year or by contacting your financial institution.

Taxable Interest vs. Non-taxable Interest

Not all interest is subject to the same taxes.

Interest payments on U.S. Treasury securities are subject to federal taxes, but they’re exempt from state and local income taxes.

Municipal bond interest is generally exempt from income taxes in the state from which the bond was issued. Municipal bonds are also often, but not always, exempt from federal income taxes.

Normally, the 1099-INT form you get from a financial institution will show the category into which your interest falls and where it should be reported on your federal tax return.

How to Earn More Interest Next Year

If it seems like a nuisance to be reporting tiny amounts of interest on your tax return, perhaps the problem is that you’re not earning as much interest as you could be.

Here are some ways you can fix that:

  1. Shop around for better rates

    The bad news is that interest rates have been declining lately, so the interest on your savings accounts and other deposits could be even less next tax year.

    The good news is that most bank customers can raise their rates even when rates generally are dropping. The best savings accounts pay several times the industry average rate, so some simple shopping around could earn you more interest.

  2. Beware of savings account fees

    In a time of low interest rates, you need to be especially cautious about savings account fees. Not all savings accounts charge a monthly fee just for having the account; but when they do, those fees could easily wipe out any interest you earn. Look for a savings account with no monthly fee.

  3. Put some of your savings into CDs

    Certificates of deposit generally earn more than savings accounts; and the longer the term you choose for your CD, the more you can earn.

    If you don’t expect to tap into your savings in the near future, consider putting at least some of that money into a CD. That could help you earn more interest next year.

Of course, earning more interest could mean paying more taxes. Still, the bottom line is that your increased earnings should exceed your increased taxes, so that would be a nice problem to have.

Frequently Asked Questions

Q: I’m starting to question how my bank credits interest to my CDs. I started two CDs with the same bank at different times. For one I get a statement every month; for the other I have yet to see a statement. For the account where I get a statement, it says I am earning interest but the market value hasn’t changed in the last two statements. At this point, I’m no longer concerned about earning the best CD rates — I’m just trying to make sure I’m not getting ripped off.

A: Being diligent about monitoring your accounts is different from being paranoid. Assuming this is a legitimate, registered bank — something you can look up on the FDIC’s website at fdic.gov — there is almost certainly nothing nefarious going on. However, mistakes do happen, and in any case it is important to fully understand how your accounts are being handled and reported.

Here are a couple possible explanations for the inconsistencies or irregularities you are seeing:

1. Statements may be on different cycles or in different formats. Banks more and more are trying to reduce expenses by cutting back on paper statements. In particular for certificates of deposit, which are not transactions accounts that customers need regular access to, banks may have them on a quarterly or even annual statement cycle. It is even possible that statements for the newer account are issued online. Banks increasingly are offering better rates for online-based CD, money market and savings accounts — vehicles that are serviced via the Internet — and in signing you up for a better rate, the bank may have put you into an online CD account. The point is, with accounts opened at different times, it is entirely possible that they are on different statement cycles, or have statements issued in different formats.

2. Interest may be accrued monthly but posted less frequently. Again, in an effort to make account administration less expensive, banks may be only posting interest to the account on a quarterly or other basis. This should not matter in the long run, as long as interest is being accrued monthly and is fully posted by the time your CD matures.

Remember, these are just possible explanations. Have a conversation with your bank about these possibilities so you can find out for sure what the story is.

Finally, you mention no longer caring about getting the best CD rates, but there is no reason you should not have competitive CD rates plus account reporting that is clear and consistent. If you can’t reach an understanding with your current bank about their reporting methods, you might want to make reporting a search criteria — along with interest rates — the next time you choose a bank.

About Author
Richard Barrington has been a Senior Financial Analyst for MoneyRates. He has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications. Richard has over 30 years of experience in financial services. He has earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the “CFA Institute”).