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Taxable Interest

Most interest income is taxable interest. In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable interest income, even if you have not withdrawn it.

What is taxable interest income?

Taxable interest income includes:

  • interest from bank accounts,
  • interest on loans you make to others, and
  • interest from most other sources.

How do I report interest income to the IRS?

Report the total interest income on line 8a of the 1040 tax form. If your total interest income is more than $1,500 the Part I and Part III of Schedule B must also be completed and attached to the 1040 tax form when filing your tax return. Note that if the interest income received is exactly $1,500 then you can report it directly on the 1040 form, line 8a. If the interest income received is $1,501 then you must report it on Part I of Schedule B.

Examples of common sources of taxable interest income are interest from:
  • certificate of deposit (CDs)
  • deposits or share accounts from credit unions, mutual savings banks, cooperative banks, and federal and domestic savings and loan associations (often termed "dividends", but they are actually interest).
  • US obligations such as US Treasury bills, notes and bonds.
  • US Savings Bonds
  • Installment sale payments
  • Life insurance proceeds remaining with the insurance company
  • Tax refunds
  • gifts for opening accounts
Are interest on traditional IRA accounts taxable?

Usually interest on a traditional IRA account is tax deferred. You will include it as income when you withdraw it from the IRA. Interest on a Roth IRA generally is not taxable.


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