Guides

Form 1099-INT Explained: Interest Income

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

Form 1099-INT reports interest income you earned during the year, and a payer must send you one if it paid you at least $10 of interest (or $600 if the interest came from your trade or business). The form arrives by January 31, a copy goes to the IRS, and you carry the boxes onto your Form 1040. This guide walks through the $10 threshold, the difference between Box 1 and Box 3, the early-withdrawal penalty in Box 2, and the tax-exempt interest in Box 8.

What Form 1099-INT is

Form 1099-INT is an IRS information return that banks, credit unions, brokerages, and the U.S. Treasury use to report interest paid to you. If a payer credited you $10 or more of interest in a calendar year, it must issue the form, furnish your copy by January 31, and file its copy with the IRS. You do not attach the form to your return, but the IRS matches its copy against what you report.

The form covers ordinary account interest, Treasury and savings-bond interest, and tax-exempt municipal interest, each in a separate box. Interest is generally taxed as ordinary income at your marginal rate, not at the lower long-term capital gains rate. Even if no 1099-INT arrives, you still owe tax on interest you earned.

The $10 threshold (and the $600 exception)

A payer must issue Form 1099-INT once it pays you $10 or more of interest in the year. That $10 floor applies to taxable interest (Box 1), Treasury and savings-bond interest (Box 3), and tax-exempt interest (Box 8). A separate $600 threshold applies only to interest paid in the course of the payer’s trade or business.

The $10 rule is a filing trigger for the payer, not an income exclusion for you. If you earned $6 of interest and never receive a form, that $6 is still taxable and belongs on your return. Backup withholding under Box 4 is reported at any amount, and the early-withdrawal penalty in Box 2 is reported regardless of size.

Box 1 vs Box 3: taxable interest vs Treasury interest

Box 1 reports ordinary taxable interest (savings accounts, CDs, corporate bonds) that is taxable at both the federal and state level. Box 3 reports interest on U.S. Savings Bonds and Treasury bills, notes, and bonds, which is taxable federally but exempt from state and local income tax. Keeping the two apart matters because Box 3 can lower your state tax bill.

Box 1 flows to the taxable-interest line of Form 1040 (Line 2b), routed through Schedule B if your total taxable interest exceeds $1,500. Box 3 interest is also federally taxable and reported on the same federal line, but most states let you subtract it on the state return because states cannot tax federal obligations. Series EE and I savings-bond interest in Box 3 may be fully excluded if used for qualified higher-education expenses under the education savings-bond program.

Box 2: the early-withdrawal penalty

Box 2 shows interest or principal you forfeited for withdrawing a time deposit, such as a CD, before maturity. This is an above-the-line deduction: you report it on Schedule 1 (Form 1040), Line 18, so it reduces your adjusted gross income even if you take the standard deduction.

The payer does not reduce Box 1 by the penalty. Box 1 shows the full interest credited, and Box 2 shows the penalty separately, so you report the gross interest as income and then deduct the forfeited amount. Because it lowers AGI, the Box 2 deduction can also help with other AGI-linked calculations, such as certain phase-outs.

Box 8: tax-exempt interest

Box 8 reports interest on obligations issued by a state, the District of Columbia, a U.S. territory, or a local government, most commonly municipal bonds and muni bond funds. This interest is exempt from federal income tax, but you still report it on Form 1040, Line 2a, for informational purposes. It is not free of all consequences.

Tax-exempt interest counts toward the calculation of how much of your Social Security is taxable and can raise your Medicare IRMAA surcharges. Box 9 breaks out specified private activity bond interest, which is a preference item for the alternative minimum tax (AMT). Muni interest is often exempt from your home state’s tax only if the bond was issued in that state; out-of-state muni interest is usually taxable at the state level.

Form 1099-INT box table

How to report Form 1099-INT on your return

Report each box on the matching line: Box 1 and Box 3 as taxable interest on Line 2b, Box 8 as tax-exempt interest on Line 2a, Box 2 as an adjustment on Schedule 1, and Box 4 withholding on the payments line. Use Schedule B (Form 1040) when your total taxable interest or ordinary dividends exceeds $1,500, or when you must answer the foreign-account questions.

1. Add up Box 1 and Box 3 across all your 1099-INT forms; enter the total taxable interest on Line 2b.
2. Enter total Box 8 tax-exempt interest on Line 2a.
3. If total taxable interest exceeds $1,500, list each payer on Schedule B, Part I.
4. Deduct any Box 2 early-withdrawal penalty on Schedule 1, Line 18.
5. Claim Box 4 backup withholding as tax already paid, and subtract state-exempt Treasury interest on your state return.

Report interest even without a form. If a payer never sends a 1099-INT (for example, under $10 of interest, or a lost form), the interest is still taxable and you enter it on the same lines. The IRS receives payer copies and matches them against your return, so omitted interest can trigger a CP2000 notice.

FAQ

Do I have to report interest under $10 with no 1099-INT?

Yes. The $10 figure is only the threshold that requires the payer to issue a form, not a tax-free allowance. Interest you earn is taxable from the first dollar, so report any interest, even a few dollars, on Form 1040, Line 2b. Keep your year-end bank statement as support if no form arrives.

Is Box 3 interest taxable?

Box 3 interest on U.S. Savings Bonds and Treasury bills, notes, and bonds is taxable for federal purposes and reported on Line 2b. It is exempt from state and local income tax, so most states let you subtract it on the state return. Series EE and I bond interest may be fully excluded if used for qualified higher-education expenses.

What is the difference between Box 1 and Box 3 on a 1099-INT?

Box 1 is ordinary taxable interest from banks, CDs, and corporate bonds, taxable at both the federal and state level. Box 3 is interest on Treasury obligations and U.S. Savings Bonds, taxable federally but exempt from state and local tax. Both go on Line 2b of Form 1040, but Box 3 typically reduces your state taxable income.

How do I deduct the early-withdrawal penalty in Box 2?

Enter the Box 2 amount on Schedule 1 (Form 1040), Line 18, as an adjustment to income. It is an above-the-line deduction, so you get it even without itemizing, and it lowers your adjusted gross income. Do not net it against Box 1; report the full Box 1 interest and deduct the penalty separately.

Is tax-exempt interest in Box 8 really tax-free?

Box 8 municipal interest is exempt from federal income tax, but you still report it on Form 1040, Line 2a. It can increase the taxable portion of your Social Security benefits and raise Medicare IRMAA surcharges. Box 9 private activity bond interest may also be an alternative minimum tax preference item, so it is not always fully free of tax consequences.

When should I receive my Form 1099-INT?

Payers must furnish your copy by January 31 following the tax year and file the IRS copy shortly after. If you have not received a form by mid-February and earned $10 or more, contact the payer or check your online account. Consolidated brokerage 1099s that include 1099-INT data may arrive later, sometimes into February or March.

Do I need Schedule B for a 1099-INT?

You must file Schedule B (Form 1040) when your total taxable interest or ordinary dividends exceeds $1,500, or when specific situations apply, such as owning a foreign financial account. Below $1,500, you can enter the total directly on Line 2b without Schedule B. Tax-exempt Box 8 interest does not count toward the $1,500 taxable-interest test.

For related reporting, see our guides on Schedule 1 and adjustments to income, how to calculate adjusted gross income, Form 1098 and mortgage interest, and cost basis on your investments.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.

Related guides

• Form 1099-R Explained
• Form 8300
• Form W-7
• Form SS-4
• Form 940 Explained
• Form 1099-K Explained