Most interest is taxable, although there are some types of tax-exempt interest (not many.) Knowing how to report your interest income is key when tackling this additional level of complication to any tax return.
This page:
• Describes where to report income on each tax form
• Helps you understand which form you'll need to file depending on the type and amount of interest you are reporting
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You cannot use Form 1040EZ if your interest income is more than $1,500. Instead, you must use Form 1040A or Form 1040.
Form 1040A.
You must complete Part I of Schedule 1 (Form 1040A) if you file Form 1040A and any of the following are true:
• Your taxable interest income is more than $1,500.
• You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier).
• You received interest from a seller-financed mortgage, and the buyer used the property as a home.
• You received a Form 1099-INT for tax- exempt interest.
• You received a Form 1099-INT for U.S. savings bond interest that includes amounts you reported before 2001.
• You received, as a nominee, interest that actually belongs to someone else.
• You received a Form 1099-INT for interest or frozen deposits.
List each payer's name and the amount of interest income received from each payer on line 1. If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer.
You cannot use Form 1040A if you must use Form 1040, as described next.
Form 1040.
You must use Form 1040 instead of Form 1040A or Form 1040EZ if:
• You forfeited interest income because of the early withdrawal of a time deposit,
• You received or paid accrued interest on securities transferred between interest payment dates,
• You had a financial account in a foreign country, unless the combined value of all foreign accounts was $10,000 or less during all of 2001 or the accounts were with certain U.S. military banking facilities,
• You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550), or
• You are reporting OID in an amount more or less than the amount shown on Form 1099-OID.
Schedule B.
You must complete Part I of Schedule B (Form 1040) if you file Form 1040 and any of the following apply:
• Your taxable interest income is more than $1,500.
• You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier).
• You had a foreign account.
• You received interest from a seller-financed mortgage, and the buyer used the property as a home.
• You received a Form 1099-INT for tax-exempt interest.
• You received a Form 1099-INT for U.S. savings bond interest that includes amounts you reported before 2001.
• You received, as a nominee, interest that actually belongs to someone else.
• You received a Form 1099-INT for interest on frozen deposits.
• You received a Form 1099-INT for interest on a bond that you bought between interest payment dates.
On line 1, Part I, list each payer's name and the amount received from each. If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer.
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Related IRS publications
You can get more information about reporting interest income, directly from the IRS, in the form of Publication 550 which also deals with another favorite subject, capital gains tax laws.
If you file a paper tax return, you will need to attach Schedule A with your 1040, or Schedule 1 with your 1040a. (If you do your taxes online, all of this will be taken care of for you electronically.)
Note: you will need an Adobe Acrobat Reader to view these publications, which you can get here. (But you probably already have it.)
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