1099-INT Explained: How to Report Bank Interest Income on Your Taxes
February 25, 2026
What Triggers a 1099-INT
Any financial institution that pays you $10 or more in interest during the year must send you a Form 1099-INT. This includes:
- Bank savings accounts, money market accounts, CDs
- U.S. savings bonds and Treasury bills
- Corporate bonds held in taxable accounts
- Seller-financed mortgages where you're the lender
- Tax refund interest paid by the IRS (if your refund was delayed)
If you earned less than $10 from a single institution, you may not receive a 1099-INT — but the income is still technically taxable and should be reported.
1099-INT Box by Box
Box 1: Interest Income
Ordinary taxable interest. This is the main number — taxable at your regular income tax rate. High-yield savings accounts, CDs, and money market accounts all generate Box 1 interest. With rates elevated in 2025, this box is larger than it was for most of the 2010s.
Box 2: Early Withdrawal Penalty
Penalty paid for early redemption of a CD or other time deposit. This amount is deductible as an above-the-line deduction on Schedule 1 — reducing your AGI even if you don't itemize. The deductible amount is also in Box 2.
Box 3: Interest on U.S. Savings Bonds and Treasury Obligations
Interest from U.S. government bonds (I-bonds, EE bonds, T-bills, T-notes, T-bonds). Federally taxable but exempt from state and local income taxes. Report on your federal return; exclude from state return.
Box 4: Federal Income Tax Withheld
Backup withholding (24%) applied if you didn't provide a valid TIN. Most accounts have $0 here. Amount is a credit on your return (Line 25b on Form 1040).
Box 8: Tax-Exempt Interest
Interest from municipal bonds (munis). Not subject to federal income tax. Still reported for AMT calculations (Box 9 shows the AMT-preference portion). Also exempt from state taxes if the bonds are from your home state — check your state rules.
High earners: even though municipal bond interest isn't taxable, it counts toward MAGI calculations that affect Medicare premiums (IRMAA surcharges) and other phase-outs.
Box 9: Specified Private Activity Bond Interest
Subset of tax-exempt interest (Box 8) from private activity bonds. Tax-exempt for regular tax purposes, but potentially subject to Alternative Minimum Tax. Report on Form 6251 if you're calculating AMT.
Box 10: Market Discount
If you bought a bond at a discount in the secondary market and it matured or you sold it at face value, the difference may be ordinary income (market discount) rather than capital gain.
Where to Report 1099-INT on Your Tax Return
- Box 1 interest: Schedule B (if total taxable interest > $1,500 from all sources) → Form 1040 Line 2b
- Box 3 (U.S. obligations): Schedule B, separate line noting it's U.S. obligation interest
- Box 8 (tax-exempt): Form 1040 Line 2a (not taxable, but still reported)
- Box 2 (early withdrawal penalty): Schedule 1 Line 18 as deduction
Interest Income and Your Tax Planning
With high-yield savings accounts paying 4–5% APY, a $100,000 emergency fund generates $4,000–$5,000 in taxable interest annually. At the 22% marginal rate, that's $880–$1,100 in federal tax. Some taxpayers shift excess cash to municipal bonds or I-bonds to reduce this tax burden.
Parse All Your 1099 Forms
Upload your 1099-INT alongside any other 1099 forms to 1099parser.com to extract all boxes across all variants — INT, DIV, NEC, MISC, B — into structured data for tax preparation.