Taxable Interest Income is any form of interest you received that was credited to an account and you are able to withdraw without penalties during the year it was available. Some interest you receive may be tax exempt. Read more about tax-exempt interest income here.
Taxable interest is received on Forms 1099-INT or 1099-OID and you must report all taxable and tax-exempt interest on your tax return even if you didn’t receive the forms.
Below are examples of taxable interest income.
Interest on a bank account, money market accounts, certificates of deposit, corporate bonds and deposited dividends including distributions are taxable interest. This includes distributions on deposits or share accounts, credit unions, domestic building and domestic federal savings, and loan associations and mutual saving banks.
Treasury bills, notes, and bonds are exempt from all state and local taxes.
Savings Bond interest includes the annual interest but interest on Series EE and Series I U.S. Savings bonds generally does not have to be reported until you redeem or dispose of the bonds or until they mature. Interest from these bonds may be excluded from income if you pay qualified higher educational expenses during the year. Interest on municipal bonds is non-taxable. If your 1099-INT has the words “Income not reported to IRS” or “Details of 1099 tax-exempt interest” then that interest is not taxable.
Other Interest from businesses such as interest received from damages or delayed death benefits should be reported on Form 1099-INT if it exceeds $600.
The credit union may not issue a form summarizing interest if the amount is less than $10. However, you are still required to report all income. The IRS allows rounding to whole numbers. If the interest income is 49 cents, you can round that amount to 0 and not have to pay taxes on it.