How to Report CD Interest on Your Tax Return: 1099-INT and Schedule B

To report CD interest on your tax return, add up the Box 1 amounts from every Form 1099-INT your banks sent you and enter the total on Line 2b of Form 1040. If your interest and ordinary dividends from all sources add up to more than $1,500 for the year, you also fill out Schedule B listing each payer. That’s the whole mechanic. The rest is knowing which year the interest belongs in, what to do with an early withdrawal penalty, and a few situations that change the form you file.

The 1099-INT Your Bank Sends You

Any bank or credit union that paid you $10 or more in interest during the year must send you a Form 1099-INT by January 31 and file a copy with the IRS.¹² Three boxes carry everything a CD holder needs:

Box 1 is your total taxable interest for the year. This is the figure that lands on your return.
Box 2 is any early withdrawal penalty the bank charged. It gets its own line on a different form.
Box 3 is interest from U.S. Savings Bonds and Treasury obligations, federally taxable but generally exempt from state and local tax.

Earned less than $10 and didn’t get a form? The interest is still taxable, and you’re still required to report it. Pull the number off your year-end account statement.³

If a corrected 1099-INT shows up after you’ve already filed, you’ll need Form 1040-X to amend. If a form never arrives by mid-February, start with the bank; the IRS can help at 800-829-1040 if that doesn’t resolve it.⁴

Line 2b, and When You Also Need Schedule B

Add the Box 1 figures from all your 1099-INTs. Put the total on Line 2b of Form 1040, labeled “Taxable interest.” That’s it for a single CD at a single bank earning modest interest.

Once your combined taxable interest and ordinary dividends from every source cross $1,500 for the year, Schedule B comes into play. In Part I you list each payer by name with the interest from that institution; the total carries over to Line 2b.⁵ The $1,500 threshold is cumulative across all accounts, so a few CDs plus a savings account plus some bond interest can trip it faster than people expect.

Interest You Owe Tax on Before You Touch the Money

The timing rule that trips up CD holders is constructive receipt. The IRS treats interest on a deposit account as received the moment it’s credited and available for withdrawal, whether or not pulling it out would cost you a penalty.⁶ A five-year CD that credits interest annually produces a tax bill every year, not a single bill at maturity.

CDs of one year or less that pay all their interest at maturity are simpler: you report the interest in the year it’s paid or made available.⁶

A longer CD that defers interest for more than a year is treated as an original issue discount (OID) instrument. You have to include a portion of the total interest in income each year even though no cash reaches you until maturity.⁶ The bank reports the accrued amount on Form 1099-OID rather than (or alongside) a 1099-INT.³ The reporting mechanic is the same: the OID amount goes on Line 2b.

Deducting an Early Withdrawal Penalty

If you broke a CD and the bank charged a penalty, don’t just net it against the interest. The Box 2 penalty is an adjustment to income, claimed on Schedule 1 (Form 1040), Part II, Line 18.⁷ The total from Schedule 1, Line 26, flows to Line 10 of Form 1040 and reduces your adjusted gross income.⁸

Because it’s above the line, you get it whether you itemize or take the standard deduction. A lower AGI can also help you qualify for credits and deductions that phase out at higher incomes. And if the penalty exceeds the interest you earned on that CD, you can still deduct the full penalty; the excess reduces your other income.

Joint CDs: The Nominee Distribution

Banks usually issue one 1099-INT under the primary account holder’s Social Security number even when a CD is held jointly. The primary holder can’t just report their share and ignore the rest. The IRS already has the full amount tied to that SSN.

The fix is a nominee distribution. Report the full interest on Schedule B, then enter a subtotal and subtract the co-owners’ shares on a line marked “Nominee Distribution.”⁵ You also have to issue a 1099-INT to each co-owner for their share and transmit copies to the IRS with Form 1096.² Each co-owner then reports that share on their own return. Spouses filing jointly skip the whole process; the interest already lives on their shared return.

CDs Inside an IRA Don’t Get Reported Each Year

If your CD sits inside a traditional IRA, Roth IRA, or similar tax-advantaged account, none of the above applies while the money stays in the account. No annual 1099-INT, no entry on Line 2b. Traditional IRA interest is taxed as ordinary income when you take distributions; qualified Roth distributions come out tax-free. The annual reporting steps in this article apply only to CDs in regular taxable accounts.

The Extra 3.8% Tax for Higher Earners

CD interest counts as net investment income, and higher earners owe an additional 3.8% Net Investment Income Tax on it. The NIIT applies to the lesser of your net investment income or the amount your modified AGI exceeds the threshold for your filing status:⁹

Married filing jointly or qualifying surviving spouse: $250,000
Single or head of household: $200,000
Married filing separately: $125,000

If NIIT applies, you file Form 8960 and enter your taxable interest on Line 1.¹⁰ These thresholds don’t adjust for inflation and haven’t moved since 2013.

CDs at Foreign Banks

Interest from a CD at a foreign bank is taxed exactly like domestic CD interest, but the disclosure obligations expand. You must complete Schedule B, Part III, regardless of the amount of interest, just to disclose the foreign account.¹¹ And if the combined value of all your foreign financial accounts topped $10,000 at any point during the year, you also file FinCEN Form 114 (the FBAR) electronically through FinCEN’s BSA E-Filing System. It’s separate from your tax return.¹² FBAR penalties are steep, including for unintentional misses.

What Skipping It Costs

Because the bank sends the IRS a copy of every 1099-INT, missing CD interest is one of the easiest items for the agency’s automated matching system to flag. A mismatch typically arrives as a CP2000 notice proposing additional tax.

On top of the tax itself, the IRS can add a 20% accuracy-related penalty on the underpayment. The agency specifically cites failing to report income shown on a 1099 as negligence that triggers that penalty.¹³ Interest runs from the original due date on top of that. A few hundred dollars of unreported CD interest can get expensive by the time the notice cycle plays out.

1
Internal Revenue Service. About Form 1099-INT Interest Income
2
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
3
Internal Revenue Service. Topic No. 403, Interest Received
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Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect
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Internal Revenue Service. Instructions for Schedule B (Form 1040)
6
Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
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Internal Revenue Service. 2025 Schedule 1 (Form 1040)
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Internal Revenue Service. 1040 (2025) Instructions
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Internal Revenue Service. Topic No. 559, Net Investment Income Tax
10
Internal Revenue Service. Instructions for Form 8960 (2025)
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Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
12
Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
13
Internal Revenue Service. Accuracy-Related Penalty