Are Savings Taxable?

One of the biggest concerns people have when it comes to saving money is whether or not those savings are taxable. 

It’s no wonder people are worried about this! The tax code is incredibly complex, and it seems like every time you turn around the rules have changed.

We’re here to help! Our team of experts has put together a guide that will answer all of your questions about savings and taxes. In this post, you’ll learn everything from what counts as taxable income to how to report your savings on your tax return.

Are Savings Taxable? The amount you have in your savings account is not taxable, however, the interest you earn on your savings account typically is not tax exempted, unless the funds are being stored in an IRA or other type of retirement plan.

Are Savings Taxable?

If you keep money in a regular savings account, it’s very unlikely that you’ll earn much interest at present rates. However, The Internal Revenue Service (IRS) considers any interest earned on a savings account to be taxable income and must be reported on your tax return.

It includes interest earned on traditional savings accounts as well as high-yield savings accounts, certificates of deposits (CDs), and money market deposit accounts.

  • Any interest earned on a savings account is taxable income, although the amount in your savings account does not change..
  • For any interest earned over $10, your bank will send you a 1099-INT form. You should report any interest earnings (even if they are less than $10), however.
  • For the year in which you receive interest, it is included in your taxable income.

For the year, any interest you earn in a savings account is taxed at your income tax rate. In other words, it’s an addition to your wages and is taxed as such. Those rates ranged from 10% to 37% as of the 2021 tax year.

If your net investment income (NII) or modified adjusted gross income (MAGI) exceeds a certain level, an additional tax known as the net investment income tax is imposed.

Savings accounts may help you save money on your taxes in a few different ways. Some savings accounts allow you to deposit pre-tax funds, lowering your taxable income for the year you contribute.

Other savings accounts let you invest money tax-free, lowering your tax burden in the future.

Calculating Taxes On Your Savings.

The Internal Revenue Service considers any interest you earn on your traditional or high-yield savings account to be ordinary income. This means that if the bank pays out more than what was originally put in, they will charge a tax for this excess at year’s end–and it could potentially add up!  

One way To figure out how much tax you’ll have to pay on a savings account, look at your marginal tax bracket or the bracket in which your last dollar of taxable income falls.

The table below shows tax brackets for the 2016 tax year. These tax brackets are adjusted higher for inflation each year, resulting in a different range of income taxes.

RateSingleMarried Filing JointlyHead of Household
10%$0 to $9,275$0 to $18,550$0 to $13,250
15%$9,275 to $37,650$18,550 to $75,300$13,250 to $50,400
25%$37,650 to $91,150$75,300 to $151,900$50,400 to $130,150
28%$91,150 to $190,150$151,900 to $231,450$130,150 to $210,800
33%$191,50 to $413,350$231,450 to $413,350$210,800 to $413,350
35%$413,350 to $415,050$413,350 to $466,950$413,350 to $441,00

Taxes are complicated, depending on a person’s circumstances, and they evolve over time.

How To File Savings In Your Federal Taxes?

1099-INT is a tax form that you receive if you have interest income on your savings account(s). This tax document is typically sent to you by mail for profits made. Even if you don’t get a 1099-INT, you are still required to report the money earned as long as the interest earned exceeds $10. 

Banks, credit unions, and other financial institutions are required to report any interest payments they make to customers to the IRS. The IRS will compare your taxable interest income with what your bank reports to verify there are no errors. You won’t need to submit a copy of your 1099-INT form; rather, you must include the information on your tax

  • If you don’t pay taxes on the interest income you report on your tax return, you’ll owe money to the IRS if the taxes due exceed the amount of taxes paid throughout the year.
  • These rules may vary depending on where you live and your individual situation.
  • If you expect a refund, the taxes levied on the interest income will just decrease the amount of money you receive.

State Taxes On Your Savings Amount

Aside from the federal government, 43 states impose an income tax. If you reside in one of these states, you must pay taxes on your interest earnings in the same manner as any other annual income you earn during the year.

What’s Exempt From Tax

You don’t pay taxes on the entire balance in your savings account if you’ve made a deposit. That money is yours, and you already paid income taxes on it before depositing it in your account.

You are only taxed on the $20 in interest that the bank pays you if your savings account has $10,000 and returns 0.2 percent.


When it comes to savings, the interest you earn is typically taxable. However, if your funds are being stored in an IRA or other type of retirement plan, then the earnings on those investments will not be taxed during that time period.

In fact, if you have a Roth IRA, then any earnings will be non-taxable when it comes time to withdraw them. This is because, unlike a Traditional IRA, Roth plans require you to pay taxes on the money today so that you can withdraw it later at “age 59 and a half” without any penalty or repercussion.