Form 1099-INT: Interest Income

A Form 1099-INT: Interest Income in the United States records the particulars required for the matter it documents.

Interest income is generally includible in gross income under IRC Section 61(a)(4), and payers must file Form 1099-INT for each person to whom they paid amounts reportable in Boxes 1, 3, and 8 of $10 or more (or $600 or more of interest paid in the course of a trade or business as described in IRC Section 6041). The form covers interest from savings accounts, checking accounts, certificates of deposit (CDs), money market accounts, U.S. Treasury obligations, corporate bonds, and other debt instruments. Interest from seller-financed mortgages where the buyer uses the property as a personal residence is also reportable.

The form distinguishes between different types of interest that receive different tax treatment. Interest from U.S. Treasury obligations (reported in Box 3) is taxable for federal purposes but exempt from state and local income tax under 31 U.S.C. Section 3124. Conversely, tax-exempt interest from state and municipal bonds (reported in Box 8) is excluded from federal gross income under IRC Section 103 but may be subject to state income tax if the bonds were issued by another state. Certain private activity bond interest, while federally tax-exempt, is a tax preference item subject to the alternative minimum tax under IRC Section 57(a)(5).

Form 1099-INT is issued whenever a financial institution or other payer pays $10 or more in interest to an individual during the tax year. The most common scenario is earning interest on bank savings accounts, CDs, and money market accounts, where the bank issues a consolidated Form 1099-INT covering all interest-bearing accounts. Brokerage firms issue Form 1099-INT for interest earned on cash balances, bond coupon payments, and accrued interest on fixed-income securities held in the account.

U.S. Treasury securities generate Form 1099-INT for interest paid on Treasury bills, notes, bonds, TIPS (Treasury Inflation-Protected Securities), and Series EE/I savings bonds when redeemed or when the taxpayer reports interest annually. For savings bonds, the taxpayer may elect to report interest annually as it accrues under IRC Section 454 or defer reporting until redemption, maturity, or other disposition. The interest exclusion under IRC Section 135 allows qualifying taxpayers to exclude savings bond interest used to pay higher education expenses.

Additional scenarios include receiving interest on tax refunds from the IRS or state agencies (reported in Box 1), interest from corporate bonds and notes, interest from peer-to-peer lending platforms, interest credited by insurance companies on policy proceeds left on deposit, and original issue discount (OID) from certain debt instruments (though OID above a de minimis threshold is reported on the separate Form 1099-OID). Taxpayers who cash CDs before maturity will see the early withdrawal penalty reported in Box 2, which is deductible as an adjustment to income on Schedule 1, Line 18 of Form 1040, regardless of whether the taxpayer itemizes deductions.

Form 1099-INT uses specific boxes to categorize interest by type and tax treatment. Box 1 reports total taxable interest income, including interest on bank deposits, corporate bonds, and taxable Treasury obligations. This amount is reported on Form 1040, Line 2b, and if total interest from all sources exceeds $1,500, the taxpayer must also complete Schedule B listing each payer and amount.

Box 2 reports early withdrawal penalties assessed when a CD or time deposit is redeemed before its maturity date. This penalty is deductible as an above-the-line adjustment to income on Schedule 1, Line 18, even if it exceeds the interest earned on the deposit. Box 3 reports interest on U.S. Savings Bonds and Treasury obligations, which is included in the Box 1 total for federal purposes but is exempt from state and local income tax, providing taxpayers a state tax benefit.

Box 4 reports federal income tax withheld through backup withholding at 24% under IRC Section 3406, which applies when the payee has failed to furnish a correct TIN or the IRS has notified the payer that backup withholding is required. Box 6 reports foreign tax paid on interest income, which may be claimed as a credit on Form 1116 or as a deduction on Schedule A. Box 8 reports tax-exempt interest from municipal bonds under IRC Section 103, which is reported on Form 1040, Line 2a. Although this interest is not taxable, it must be reported because it affects the taxability of Social Security benefits under IRC Section 86 and may be relevant for the net investment income tax under IRC Section 1411. Box 9 reports specified private activity bond interest, which is tax-exempt for regular tax purposes but constitutes a preference item for AMT computation under IRC Section 57(a)(5).