Where to Report Interest Income on 1040: Schedule B and 1099-INT

Taxable interest income goes on Line 2b of Form 1040, 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 file Schedule B, which lists each payer and the amount before that total flows back to Line 2b. Every dollar of interest you earn is part of your gross income and has to be reported, whether or not a 1099-INT arrives in the mail.¹

Which Boxes on the 1099-INT Go Where

Banks, credit unions, and brokerages send Form 1099-INT by the end of January for any account that earned at least $10 in interest.² Four boxes matter for placement on your return:

Box 1, taxable interest from savings accounts, CDs, and similar deposits, goes on Line 2b.
Box 3, interest from U.S. Savings Bonds and Treasury obligations, also goes on Line 2b for federal purposes, but it’s kept separate because states can’t tax it.
Box 4, any federal income tax withheld under backup withholding rules, is claimed as a payment on your return.
Box 8, tax-exempt interest (typically municipal bonds), goes on Line 2a.³

Add together Box 1 and Box 3 from every 1099-INT you received, plus any interest you tracked yourself. If you don’t need Schedule B, the combined figure goes straight onto Line 2b. If you do need Schedule B, the total at the bottom of Part I is what carries to Line 2b.

Line 2a doesn’t feed your adjusted gross income and doesn’t directly increase your tax, but the IRS still requires the number there.⁴

If No 1099-INT Arrived

The $10 reporting threshold binds the payer, not you. Earn $8 in interest and the bank doesn’t have to send a form, but you still owe tax on that $8 and have to include it on your return.¹ If you were expecting a 1099-INT and it never showed, contact the financial institution first. If it still hasn’t arrived by the end of February, call the IRS at 800-829-1040 and the agency will reach out to the payer for you.⁵

Don’t hold up your return waiting on a missing form. Use your own records to estimate the interest, file on time, and amend later with Form 1040-X if the real number turns out different.⁵

When You Have to File Schedule B

Most people with plain bank interest never need Schedule B. You need it only when at least one of the following is true:⁶

Your taxable interest is more than $1,500. This is the trigger that catches most filers.
You received a 1099-INT that includes interest actually belonging to someone else (nominee interest).
You need to report an original issue discount amount different from what’s on your 1099-OID.
You’re reducing interest income for amortizable bond premium on a bond bought above face value.
You sold property and the buyer is paying you interest on seller financing.
You’re claiming the education-related exclusion for Series EE or I bonds on Form 8815.
You had a foreign financial account or connection to a foreign trust that Part III asks about.

If none apply, skip Schedule B and put the total directly on Line 2b.

Filling Out Schedule B Part I

Part I is a straight list. Enter each payer name exactly as it appears on your 1099-INT, with the corresponding interest amount next to it. Include every source, even small amounts that never generated a 1099.⁴

Add the individual entries for a subtotal on Line 1. Adjustments come off that subtotal, and the figure on Line 4 is what you carry to Line 2b of Form 1040. The number has to match your records exactly. A mismatch between Schedule B and the 1099s already on file with the IRS is one of the most reliable triggers for a matching notice.

Nominee Interest

If a 1099-INT arrives in your name but part of the interest belongs to someone else, such as a joint account holder who isn’t your spouse, put the full amount on Line 1 and then subtract the other person’s share below the subtotal, labeled “Nominee Distribution.” You also have to issue a 1099-INT to the actual owner for their portion.⁴

Seller-Financed Mortgage Interest

Interest a buyer pays you directly on seller financing goes on Line 1 of Schedule B ahead of your other entries. Include the buyer’s name, address, and Social Security number. Leaving that information off carries a $50 penalty, and the buyer needs your SSN to deduct the interest on their own return.⁴

OID and Accrued Interest Adjustments

Original issue discount is interest that builds up over the life of a bond sold below face value. It goes on Line 1 alongside your other interest. If the taxable OID you actually need to report is less than the amount shown on your 1099-OID, list the full 1099-OID figure and subtract the difference below the subtotal, labeled “OID Adjustment.”⁴

A similar move applies if you bought a bond between payment dates and paid accrued interest to the seller. Your 1099 may bundle that accrued amount into your interest total even though it was really a return of money you fronted. Subtract it below the subtotal, labeled “Accrued Interest.”⁴

Part III and Foreign Accounts

Part III of Schedule B has nothing to do with how much interest you earned. It asks two yes-or-no questions: whether you had a financial interest in or signature authority over a foreign financial account, and whether you received distributions from or were connected to a foreign trust.⁶

Answer yes to the foreign account question and the combined value of your foreign accounts topped $10,000 at any point during the year, and you also have to file FinCEN Form 114 (the FBAR) electronically through the BSA E-Filing System. That’s a separate filing from your tax return with its own deadline.⁷ Interest earned in a foreign account is taxable and goes on Line 2b just like domestic interest.

Treasury Interest and Your State Return

Interest from Treasury bills, notes, bonds, and U.S. savings bonds is fully taxable federally, but federal law bars states from taxing it.⁸ That’s why the 1099-INT breaks Treasury interest out in Box 3 rather than folding it into Box 1. On your state return you typically subtract the Box 3 amount from taxable income. The exact line varies by state, but the exemption applies everywhere.

Why Line 2a Still Matters

Municipal bond interest reported on Line 2a doesn’t raise your federal income tax, thanks to the exclusion for state and local bond interest.⁹ It can still affect you indirectly. The Social Security Administration includes tax-exempt interest when calculating “combined income,” which determines how much of your Social Security benefits are taxable.¹⁰ It can also affect eligibility for certain income-based credits and deductions, and the IRS uses Line 2a to run those calculations. Reporting it is not optional.

What Happens If You Leave Interest Off

Financial institutions send every 1099-INT directly to the IRS, so the agency already knows what you earned before you file.¹¹ When your return doesn’t match, a computer-generated notice follows. If the missing interest leads to a substantial understatement of tax, the IRS can add an accuracy-related penalty equal to 20% of the underpayment.¹² Interest also runs on any balance from the original filing deadline until you pay.¹³

For most filers the unreported amount is small enough that a notice is more of a hassle than a crisis, but the matching system catches these discrepancies reliably. Add up every 1099-INT you received, include any interest from your own records that didn’t get one, and make sure Line 2b agrees with the total.

1
Internal Revenue Service. Topic No. 403, Interest Received
2
Internal Revenue Service. About Form 1099-INT, Interest Income
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Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID
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Internal Revenue Service. Instructions for Schedule B (Form 1040) (2025)
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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. About Schedule B (Form 1040), Interest and Ordinary Dividends
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Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
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Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation
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Office of the Law Revision Counsel. 26 USC 103 – Interest on State and Local Bonds
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Social Security Administration. Must I Pay Taxes on Social Security Benefits?
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Office of the Law Revision Counsel. 26 USC 6049 – Returns Regarding Payments of Interest
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Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026