Bank, bond and savings interest on your return
What interest you must report, which kinds are tax free, and how savings bonds and Treasury securities are treated. A quick read for tax years 2023 to 2026.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 26, 2026.
Chapter 6 of Publication 17 covers interest: what is taxable, what is not, and how to report it. It matters if you have a bank account, CD or savings bonds. The 2025 edition has it on printed pages 54 to 61; the 2023 and 2024 editions run to page 62. Think of this page as a friendly summary; the IRS publication has the last word.
- Interest is income once it is credited and you could withdraw it, even if you leave it there.
- Report all of it, with or without a Form 1099-INT: taxable interest on line 2b, tax-exempt interest on line 2a.
- Schedule B is required when taxable interest is over $1,500 (2023 to 2025), and in a few other cases.
- Treasury and savings-bond interest is taxed federally but not by states. Most state and local bond interest is not taxed federally.
- No taxpayer ID on file means 24 percent backup withholding (2023 to 2025).
What counts as taxable interest
The same in the 2023, 2024 and 2025 editions:
- Interest on savings, checking and CDs, and the "dividends" that credit unions pay on deposits.
- Interest on a tax refund, on a loan you made, or on installment sale payments.
- An account-opening gift worth over $10 (deposit under $5,000) or over $20 (deposit of $5,000 or more).
- Not money market fund payouts, which are usually dividends.
Savings bonds and discounts
- Series EE and I bond interest comes when you cash the bond. Cash-method filers either wait until the bond is cashed or matures, or report each year's increase. Pick one method for all your bonds.
- The college exclusion (Form 8815) needs a Series I bond or a Series EE bond issued after 1989, an owner 24 or older at issue, college costs paid the same year, and not married filing separately.
- Original issue discount (OID) on bonds sold below face value is reported as it builds up. A discount under 0.25 percent of face value times the full years to maturity counts as zero.
Numbers by year
| Tax year | Schedule B needed above | Bond exclusion shrinks across income, most filers | Same, joint |
|---|---|---|---|
| 2023 | $1,500 | $91,850 to $106,850 | $137,800 to $167,800 |
| 2024 | $1,500 | $96,800 to $111,800 | $145,200 to $175,200 |
| 2025 | $1,500 | $99,500 to $114,500 | $149,250 to $179,250 |
| 2026 planning | Not confirmed | $101,800 to $116,800 | $152,650 to $182,650 |
For 2026, treat the numbers as planning figures (source: Rev. Proc. 2025-32), since the IRS has not issued Pub 17 (2026). The reporting rules did not change from 2023 to 2025. Check line numbers on the final 2026 Form 1040.
An invented example
Sam and Lee (invented) file jointly for 2025. They cash an eligible Series EE bond for $9,000: $6,000 cost plus $3,000 interest. They pay $4,500 of tuition in 2025, have no other tax-free help, and their income is under the limit.
- Share excluded: $4,500 / $9,000 = 0.5.
- Excluded interest: $3,000 x 0.5 = $1,500. Still taxable: $3,000 - $1,500 = $1,500.
Mistakes people make
- Ignoring interest because no Form 1099-INT came.
- Subtracting an early-withdrawal penalty from the interest you report.
- Thinking savings-bond interest is free of federal tax. Only states skip it.
Quick check
You open a $2,000 savings account, earn $40 of interest and get a gift that cost the bank $14. What interest do you report? (2025)
Answer: $54. A gift over $10 on a deposit under $5,000 counts as interest, so $40 + $14.
A 5-year bond issued at $992 pays $1,000 at maturity. Is there yearly OID? (2025)
Answer: No. The $8 discount is below 0.25 percent x $1,000 x 5 years = $12.50, so it counts as zero.
Your taxable interest is exactly $1,500, with no other trigger. Is Schedule B required? (2025)
Answer: No. The trigger is more than $1,500.
Common questions
Do I report interest if no Form 1099-INT arrives?
Yes, all of it. If the form has not come by February 15, ask the bank.
Is Treasury or municipal bond interest taxed?
Treasury interest is taxed federally but not by states or localities. Most state and local bond interest is not taxed federally, but show it on line 2a.
How is my child's savings interest taxed?
It is generally the child's income, even in an account you hold as custodian. Part may be taxed at the parent's rate (Form 8615), or some parents report it on their own return (Form 8814).
Official sources
- IRS Publication 17 (2025), chapter 6
- IRS Publication 17 (2024), chapter 6
- IRS Publication 17 (2023), chapter 6
- IRS Revenue Procedure 2025-32 (2026 amounts)
- IRS Revenue Procedure 2024-40 (2025 amounts)
- IRS Revenue Procedure 2023-34 (2024 amounts)
Keep reading
- Taxable Social Security: Pub 17 Chapter 7
- Other Income: Pub 17 Chapter 8 in Plain English
- Key Tax Numbers by Year, 2023 to 2026
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