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For a typical U.S. individual federal income tax return, taxable interest is generally reported on Form 1040 or 1040-SR line 2b; tax-exempt interest goes on line 2a. You generally must report taxable interest even if you did not receive Form 1099-INT or Form 1099-OID. For a 2025 return, Schedule B is generally required when taxable interest is more than $1,500, or when another Schedule B condition applies. That threshold affects the schedule, not whether interest must be reported.
This guide covers the general U.S. federal rules for individual filers using 2025 return instructions. State and local rules vary, and nonresident alien returns, trusts, businesses, estates, and specialized transactions may be governed by different rules.
Which interest is taxable?
Interest is generally taxable in the year it is paid or credited to an account and available for withdrawal without penalty. Common taxable interest includes earnings from bank and money-market accounts, certificates of deposit, corporate bonds, and deposited insurance dividends. Some payments described as dividends may be treated as interest for federal tax purposes.
Tax treatment depends on the instrument and sometimes on when income is recognized. Use the applicable-year IRS instructions if a security has special features or your information return requires an adjustment.
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Taxable, tax-exempt, and tax-deferred interest
- Taxable interest: Generally included in federal taxable income and reported on Form 1040 line 2b.
- Tax-exempt interest: Interest on certain state and municipal bonds may be exempt from federal income tax, but it is still reported on Form 1040 line 2a. Exceptions can apply; for example, market discount on a tax-exempt bond may be taxable, and private-activity bond interest may affect alternative minimum tax.
- Tax-deferred retirement-account earnings: Interest inside a traditional IRA is generally not current taxable interest just because the account earned it. IRA distributions are handled under retirement-distribution rules. Roth IRA treatment depends on whether a distribution qualifies. Do not report IRA interest as tax-exempt interest.
U.S. Treasury securities
Interest on Treasury bills, notes, and bonds is taxable for federal income tax purposes but exempt from state and local income taxes. This differs from qualifying municipal-bond interest, which may be federally tax-exempt subject to exceptions.
When is interest income recognized?
For many accounts, interest is taxable when received or credited and available to withdraw without penalty. Some investments follow different timing rules, so cash received is not always the same as taxable interest for the year.
Savings bonds
Savings-bond interest is generally included in income when the bond is redeemed, to the extent it was not included earlier. A taxpayer who redeems qualifying Series EE or I bonds issued after 1989 and pays qualified higher-education expenses during the year may be eligible to exclude some or all of the interest. Eligibility requirements and income limits apply; check the current Form 8815 instructions and IRS Publication 550.
Original issue discount
Original issue discount (OID) is treated as interest and generally included as it accrues over the debt instrument’s term, even if you receive no cash payment that year. Form 1099-OID may report the amount, but acquisition premium, bond premium, accrued interest paid to a seller, market discount, and prior-year savings-bond elections can affect what belongs on the return. Consult Publication 550 and the current Form 1099-OID and Schedule B instructions when an adjustment may apply rather than copying a gross information-return amount automatically.
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How to report interest on a 2025 federal return
- Collect your records. Gather Forms 1099-INT and 1099-OID, brokerage consolidated statements, savings-bond records, and account statements. Include taxable interest that is not shown on an information return.
- Review the forms and account details. Form 1099-INT box 1 generally reports taxable interest other than U.S. savings-bond and Treasury interest; box 3 generally reports savings-bond and Treasury interest; box 4 reports federal income tax withheld; and box 8 generally reports tax-exempt interest. Box 9, for private-activity bond interest subject to AMT, is included in box 8—do not add it a second time. Form 1099-OID reports OID and related items. Check recipient instructions and statements for adjustments.
- Total the two categories separately. Report taxable interest on Form 1040 or 1040-SR line 2b and tax-exempt interest on line 2a. Tax-exempt interest is reported even though it is excluded from taxable income.
- Determine whether Schedule B is required. Under the 2025 Form 1040 instructions, attach Schedule B if taxable interest is over $1,500 or another Schedule B condition applies. When required, list payer names and amounts as directed by that schedule. Interest below the threshold is still reported on Form 1040.
- Enter withholding and penalties in their proper places. Report federal withholding from Form 1099-INT in the payments section, not as interest income. An early-withdrawal penalty is generally handled separately as an adjustment; follow the current recipient instructions.
For details, use the 2025 Form 1040 instructions, 2025 Schedule B instructions, and the current-year instructions for the information returns you received.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What if you did not receive Form 1099-INT?
You generally still report taxable interest. The IRS says: “You must report all taxable and tax-exempt interest on your federal income tax return, even if you don’t receive a Form 1099-INT or Form 1099-OID.” Reconcile your own bank, brokerage, bond, and other account records and include reportable amounts that were not sent to you on a form.
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The IRS describes $10 or more in interest payments as the general payer-reporting threshold for Form 1099-INT or Form 1099-OID. That threshold concerns whether a payer generally furnishes an information return; it does not exempt the recipient from reporting taxable interest. See IRS Tax Topic 403.
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Where common reporting mistakes happen
- Treating the Schedule B threshold as an income exemption: The 2025 $1,500 threshold determines when Schedule B is generally required, not whether interest is reported.
- Omitting tax-exempt interest: Tax-exempt interest generally belongs on line 2a even though it is not included in taxable income.
- Counting private-activity bond interest twice: Form 1099-INT box 9 is included in box 8; do not add it again to the tax-exempt-interest total.
- Reporting IRA earnings as current interest: Account earnings inside an IRA are generally subject to the account’s distribution rules, not reported as current taxable interest simply because they appear on a statement.
- Assuming every municipal-bond amount is tax-free: Market discount and private-activity bond rules can change the result; review the form and applicable-year instructions.
- Copying an OID amount without checking adjustments: Bond or acquisition premium, accrued interest, and other circumstances may affect the amount reportable.
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