The 1099-INT you receive for a CD is the form your bank uses to tell you and the IRS how much interest the account earned during the year. Report the amount in Box 1 on Line 2b of your Form 1040. If you broke the CD early and the bank charged a penalty, that figure appears in Box 2 and comes off your income as a separate deduction. Form 1099-INT for CD interest arrives by January 31, but you owe tax on the interest whether or not the form shows up.
When Your Bank Sends a 1099-INT
Form 1099-INT, titled “Interest Income,” is the document financial institutions use to report taxable interest.1Internal Revenue Service. About Form 1099-INT, Interest Income Banks, credit unions, and brokerages must issue one to anyone who earned at least $10 in reportable interest during the calendar year.2Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID The form has to be in your hands by January 31 following the tax year.3Internal Revenue Service. Publication 1099 (2026), General Instructions for Certain Information Returns
If your CD earned less than $10, no form may arrive, but the interest is still taxable income you have to report. The IRS is explicit that all taxable interest belongs on your return even when you don’t receive a 1099-INT.4Internal Revenue Service. Topic No. 403, Interest Received Your December bank statement will show the figure.
The Boxes That Matter on a CD
Most of the boxes on a 1099-INT don’t apply to a standard bank CD. Focus on these:
- Box 1, Interest Income. The total taxable interest credited to your CD during the year. This is the number that goes on your tax return.
- Box 2, Early Withdrawal Penalty. If you cashed out before maturity and the bank charged a penalty, the amount sits here. It becomes a deduction, discussed below.
- Box 4, Federal Income Tax Withheld. Usually zero. A number only appears if the IRS required backup withholding at a flat 24%, typically because you didn’t furnish a correct taxpayer identification number or had past issues with underreported interest. Anything withheld counts as a payment toward your tax bill.5Internal Revenue Service. Backup Withholding
Boxes 3 and 8 cover Treasury interest and tax-exempt interest. Neither applies to an ordinary bank CD.
Where the Numbers Go on Your Return
Add up Box 1 from every 1099-INT you receive and put the total on Line 2b of Form 1040. If a single bank CD is your only source of interest for the year, you can enter the number directly on that line and be done.
Once your combined taxable interest from all sources tops $1,500, you also have to complete Schedule B.6Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends Schedule B asks you to list each payer and the interest from each one; the total still flows to Line 2b.7Internal Revenue Service. Schedule B (Form 1040) – Interest and Ordinary Dividends Tax software handles the extra form automatically.
Deducting an Early Withdrawal Penalty
If you broke a CD early, the penalty in Box 2 reduces your taxable income. Report it on Line 18 of Schedule 1, which flows into the adjustments section of Form 1040 and lowers your adjusted gross income.8Internal Revenue Service. 2025 Instructions for Form 1040 This is an above-the-line deduction, so you get the benefit whether or not you itemize.
Here is the part that trips people up. The 1099-INT reports the full interest in Box 1 and the penalty separately in Box 2. You still put the full Box 1 amount on Line 2b as income, then take the penalty deduction on Schedule 1. The IRS structured it this way so the deduction reduces your overall income rather than just your interest.9Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
What Year the Interest Is Taxable
CD interest is taxable in the year the bank credits it to your account, not the year you take it out. If you open a three-year CD that credits interest annually, you owe tax on each year’s interest as it posts, even though you have not touched the money. The IRS treats credited interest as income you had access to, regardless of whether you actually withdrew it.10eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income
The IRS makes an exception when your access faces a genuine restriction, such as interest on a frozen deposit at a failing bank, which isn’t counted as income until you can get to it.9Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses An early withdrawal penalty on a standard CD does not qualify as a substantial restriction. The IRS views that as a cost you could choose to pay, not a barrier to access.
Long-Term CDs and Form 1099-OID
Most CDs pay interest at regular intervals and generate a 1099-INT each year. Some long-term CDs work differently. If a CD runs longer than one year and doesn’t pay interest periodically, instead deferring everything until maturity, or if it was issued at a discount to its face value, the bank reports the interest on Form 1099-OID (Original Issue Discount) rather than Form 1099-INT.11Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID (01/2024)
Original issue discount is the gap between what you paid for the CD and what it pays at maturity. Even though you won’t see any interest until the CD matures, the IRS requires you to report a portion of that discount as income each year it accrues.9Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses The bank calculates the annual amount and shows it on the 1099-OID. You owe tax on income you have not yet received. If that bothers you, choose CDs that pay interest at least once a year.
CDs Held Inside Retirement Accounts
A CD held inside a traditional IRA or 401(k) does not generate a 1099-INT. The interest compounds tax-deferred, and tax comes due only when you take distributions.12Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions A CD inside a Roth IRA goes further: qualified distributions are tax-free. Withdrawals from a traditional IRA come to you on Form 1099-R, not 1099-INT. So if you don’t see a form for a CD you know earned interest, check whether it sits in a retirement account.
If Your 1099-INT Never Shows Up
If the form has not arrived a few days after January 31, start with the bank. Most institutions post the form in online banking well before the mailing deadline. If you still can’t get it by mid-February, the IRS line for help is 1-800-829-1040.
You don’t have to wait for the paper form to file. Your December statement or the bank’s website will show the year’s interest, and that number is enough to report from. If you file using that figure and later get a 1099-INT showing something different, file Form 1040-X to amend.4Internal Revenue Service. Topic No. 403, Interest Received
One last boundary worth noting: nonresident aliens generally owe no U.S. tax on interest from a CD at a U.S. bank, credit union, or savings institution, as long as the interest isn’t connected to a U.S. trade or business, and typically receive no 1099-INT in the first place.13Internal Revenue Service. Nontaxable Types of Interest Income for Nonresident Aliens