On Form 1040, taxable interest goes on Line 2b and tax-exempt interest goes on Line 2a. If your total taxable interest for the year is more than $1,500, you also have to fill out Schedule B and carry the total from Part I, Line 4 over to Line 2b.1Internal Revenue Service. Instructions for Form 1040 If you’re at or under $1,500 and none of the special situations below apply, add up Box 1 of your 1099-INT forms and put the total directly on Line 2b. That’s it.
The rest depends on what kind of interest you received and whether anything unusual is going on with the account.
Do You Need Schedule B?
The $1,500 threshold is the most common trigger, but it isn’t the only one. You have to file Schedule B if any of these apply, regardless of the amount:2Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
- You had a financial interest in or signature authority over a foreign financial account, or received a distribution from a foreign trust.
- You received interest from a seller-financed mortgage where the buyer uses the property as a personal residence.
- You received a 1099-INT for interest that actually belongs to someone else (nominee interest).
- You need to reduce your interest by accrued interest paid to a bond seller, amortizable bond premium, or an original issue discount adjustment.
- You’re claiming the education exclusion for Series EE or I savings bonds issued after 1989.
If none of these fit and your taxable interest is $1,500 or less, skip Schedule B entirely.
Filling In Schedule B, Part I
Part I is a list. In the left column, write the name of each payer that reported interest to you. In the right column, enter the amount from Box 1 of that payer’s 1099-INT. List every payer separately.3Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
Add the amounts and enter the subtotal. Below the subtotal, apply any adjustments (see the next section). The result on Line 4 is what you copy to Line 2b of Form 1040.
Seller-financed mortgage interest goes at the very top of the list, before any bank or brokerage interest. You also have to include the buyer’s name, address, and Social Security number on the line. The buyer, in turn, needs your SSN. Leaving out that identifying information can trigger a $50 penalty.4Internal Revenue Service. Instructions for Schedule B (Form 1040)
Adjustments You Subtract Below the Subtotal
Nominee Interest
If a 1099-INT was issued in your name but part of the interest actually belongs to someone else (a joint account holder, for example), report the full amount on Line 1, then subtract the portion that isn’t yours below the subtotal. Label it “Nominee Distribution.” You’re also required to issue a 1099-INT to the actual owner, unless that person is your spouse, and file a Form 1096 with the IRS.3Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
Accrued Interest
If you bought a bond between interest payment dates, you paid the seller some accrued interest at purchase. When the next coupon arrives, your 1099-INT will include that accrued amount even though it wasn’t your income. Subtract it below the subtotal and label it “Accrued Interest.”4Internal Revenue Service. Instructions for Schedule B (Form 1040)
Amortizable Bond Premium
If you paid more than face value for a taxable bond, you can elect to amortize the premium and reduce your reported interest each year. Label the subtraction “ABP Adjustment.”3Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
Original Issue Discount
Original issue discount is the built-in interest on a bond bought below face value, and the IRS treats it as taxable interest.5Internal Revenue Service. Topic No. 403, Interest Received If you need to report a smaller amount than the figure shown on your 1099-OID, subtract the difference below the subtotal and label it “OID Adjustment.”3Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
Interest That Didn’t Come with a 1099-INT
Banks only have to send a 1099-INT when they pay you at least $10 in interest for the year.6Internal Revenue Service. About Form 1099-INT, Interest Income That $10 threshold controls the paperwork, not the tax. If you earned $6 in a savings account and no form ever showed up, that $6 still belongs on your return.5Internal Revenue Service. Topic No. 403, Interest Received Add it to the total you put on Line 2b (or list it as a separate payer on Schedule B if you’re filing one).
Where the Early Withdrawal Penalty Goes
If you cashed out a CD before maturity and Box 2 of your 1099-INT shows an early withdrawal penalty, don’t net it against the interest you report on Line 2b. Put the full Box 1 interest on Line 2b, and deduct the Box 2 penalty separately on Schedule 1, Line 18. That’s an above-the-line deduction, so you get it whether or not you itemize.7Internal Revenue Service. Instructions for Form 1040 (2025)
Tax-Exempt Interest on Line 2a
Interest from state and municipal bonds is generally exempt from federal tax, but the IRS still wants to see it. Enter the total from Box 8 of your 1099-INT forms on Line 2a.1Internal Revenue Service. Instructions for Form 1040 The number doesn’t add to your taxable income directly in most cases, but it feeds into other calculations, including how much of your Social Security is taxable.
Interest on U.S. savings bonds and Treasury securities is different. That’s taxable at the federal level (Box 3 on the 1099-INT) and belongs in your Line 2b total, even though it’s usually exempt from state income tax.
The Foreign Account Question in Part III
Schedule B Part III asks two yes-or-no questions about foreign accounts and foreign trusts. If you had a financial interest in or signature authority over any account outside the United States at any point during the year, you answer “Yes” to Question 7a, even if the account earned nothing.2Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
If the combined value of all your foreign accounts topped $10,000 at any point during the year, you also have to file a Report of Foreign Bank and Financial Accounts (FBAR) electronically with FinCEN. That’s separate from your tax return.8Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Larger holdings can also require Form 8938; for unmarried taxpayers living in the U.S., the thresholds start at $50,000 on the last day of the year or $75,000 at any point during it, with higher figures for joint filers and taxpayers living abroad.9Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
If You Already Filed and Missed a 1099-INT
The IRS gets its own copy of every 1099-INT, and its matching system flags returns where the numbers don’t line up. If a form arrives late or you realize one was left out, file Form 1040-X to amend the return.10Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect Include an updated Schedule B if the correction pushes you over the $1,500 line or triggers one of the other Schedule B situations, recalculate the tax, and pay any additional amount owed. Fixing it before the IRS contacts you generally keeps the penalty exposure smaller than waiting for a notice.
If a 1099-INT shows an amount you believe is wrong, ask the payer for a corrected form before you file. Resolving it at the source is faster than sorting it out later with the IRS.