IRS Publication 17 — Your Federal Income Tax (Individuals)

as joint tenants, tenants by the entirety, or tenants in common, each person’s share of any interest from the property is determined by local law.

Income from property given to a child.

Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child’s property.

Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Savings account with parent as trustee.

Interest income from a savings account opened for a minor child but placed in the name and subject to the order of the parents as trustees is taxable to the child if, under the law of the state in which the child resides, both of the following are true.

• The savings account legally belongs to the child.

• The parents aren’t legally permitted to use any of the funds to support the child.

Form 1099 -INT. Interest income is generally reported to you on Form 1099 -INT or a similar statement by banks, savings and loans, and other payers of interest. This form shows you the interest income you received during the year. Keep this form for your records. You don’t have to attach it to your tax return.

Report on your tax return the total interest income you receive for the tax year. See the Form 1099-INT Instructions for Recipient to see whether you need to adjust any of the amounts reported to you.

Interest not reported on Form 1099 -INT.

Even if you don’t receive a Form 1099 -INT , you must still report all of your interest income. For example, you may receive distributive shares of interest from partnerships or Scorporations. This interest is reported to you on Schedule K -1 (Form 1065) or Schedule K-1 (Form 1120-S). Nominees. Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099 -INT showing the interest received on your behalf.

If you receive a Form 1099 -INT and interest as a nominee for another person, see the discussion on nominee distributions under How T o Report Interest Income in chapter 1 of Pub. 550 or the Schedule B (Form 1040) instructions. Incorrect amount. If you receive a Form 1099-INT that shows an incorrect amount or other incorrect information, you should ask the issuer for a corrected form. The new Form 1099-INT you receive will have the “CORRECTED” box checked. Form 1099 -OID. Reportable interest income may also be shown on Form 1099 -OID. For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter.

The box references discussed below are from the January 2024 revisions of Form 1099 -INT and Form 1099 -DIV .

Later revisions may have different box references. CAUTION !

Exempt-interest dividends. Exempt-interest dividends you receive from a mutual fund or other regulated investment company (RIC) aren’t included in your taxable income. (However, see Information reporting requirement next.) Exempt -interest dividends should be shown on Form 1099-DIV , box 12. You don’t reduce your basis for distributions that are exempt-interest dividends. Information reporting requirement. Although exempt -interest dividends aren’t taxable, you must show them on your tax return if you have to file. This is an information reporting requirement and doesn’t change the exempt -interest dividends into taxable income. Note: Exempt-interest dividends paid by a mutual fund or other RIC on specified private activity bonds may be subject to the alternative minimum tax (AMT). The exempt -interest dividends subject to the AMT should be shown on Form 1099 -DIV , box 13. See Alternative Minimum Tax (AMT) in chapter 13 for more information. Chapter 1 of Pub. 550 contains a discussion on private activity bonds under State or Local Government Obligations.

Interest on Department of Veterans Affairs (VA) dividends. Interest on insurance dividends left on deposit with the VA isn’t taxable. This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies.

Individual retirement arrangements (IRAs). Interest on a Roth IRA generally isn’t taxable. Interest on a traditional IRA is tax deferred. You generally don’t include interest earned in an IRA in your income until you make withdrawals from the IRA. See chapter 9.

Taxable Interest—General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. The following are some sources of taxable interest.

Dividends that are actually interest. Certain distributions commonly called dividends are actually interest. You must report as interest so-called dividends on deposits or on share accounts in:

• Cooperative banks,

• Credit unions,

• Domestic building and loan associations,

• Domestic savings and loan associations,

• Federal savings and loan associations, and

• Mutual savings banks.

The “dividends” will be shown as interest income on Form 1099-INT . Money market funds. Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Generally, amounts you receive from money market funds should be reported as dividends, not as interest.

Certificates of deposit and other deferred interest accounts. If you buy a certificate of deposit or open a deferred interest account, interest may be paid at fixed intervals of 1 year or less during the term of the account. You must generally include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. If interest is deferred for more than 1 year, see Original Issue Discount (OID), later. Interest subject to penalty for early withdrawal. If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. See Penalty on early withdrawal of savings in chapter 1 of Pub. 550 for more information on how to report the interest and deduct the penalty.

Money borrowed to invest in certificate of deposit. The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. You must report the total interest income you earn on the certificate in your income. If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. See Interest Expenses in chapter 3 of Pub. 550. Example. You purchase a $10,000 certificate of deposit by borrowing $5,000 from Bank and adding an additional $5,000 of your funds. The certificate earned $575 at maturity in 2025, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. The bank gives you a Form 1099 -INT for 2025 showing the $575 interest you earned. The bank also gives you a statement showing that you paid $310 of interest for 2025. You must include the $575 in your income. If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Gift for opening account. If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest.

For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. The value is determined by the cost to the financial institution. Example. You open a savings account at your local bank and deposit $800. The account earns $20 interest. You also receive a $15 calculator. If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. You must report $35 interest income on your tax return. Interest on insurance dividends. Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to 56 Chapter 6 Interest Income Publication 17 (2025)