Learn what Form 1099-INT reports, how taxable and tax-exempt interest differ, where each box goes, and when California adjustments may apply.
Form 1099-INT, Interest Income, is an information return used by banks, credit unions, brokerages, government agencies, and other payers to report certain interest to a recipient and the IRS. It can include taxable interest, interest on U.S. savings bonds or Treasury obligations, tax-exempt interest, withholding, foreign tax, bond premium, and market discount.
The form is not a single taxable-income total. Each box must be classified under federal and state law.
Some brokerage statements combine Forms 1099-INT, 1099-DIV, and 1099-B. Use the tax-form detail rather than an account's cash-interest or performance summary.
Most interest that is paid or credited to an account and available for withdrawal is taxable when it becomes available. A payer generally furnishes Form 1099-INT for at least $10 of reportable interest in boxes 1, 3, or 8, with other filing triggers for withholding or foreign tax.
The $10 reporting threshold is not an exclusion. If Daniel earned $7 of taxable savings interest and received no form, the $7 generally remains reportable.
Interest can also be taxable without a traditional bank deposit. Examples include certificates of deposit, seller-financed obligations, certain insurance proceeds, and interest on tax refunds. Original issue discount may be reported on Form 1099-OID instead.
Box 1 generally reports federally taxable interest. Box 8 generally reports interest exempt from regular federal income tax, often from qualifying state or municipal obligations. Tax-exempt interest is still reported on Form 1040 and can affect other calculations, including taxation of Social Security benefits and certain surtaxes or credits.
Private activity bond interest in box 9 is included in box 8 but may be relevant to the alternative minimum tax. Do not add boxes 8 and 9 together.
Interest exempt federally is not necessarily exempt in California. California generally taxes interest from obligations issued by other states or their municipalities while exempting qualifying California obligations.
Box 3 reports interest on U.S. savings bonds and Treasury obligations. It is generally taxable federally but exempt from California personal income tax when it qualifies as interest from U.S. obligations.
Suppose Priya's Form 1099-INT reports:
For federal regular income tax, the $500 and $150 are generally taxable, while the $200 is reported as tax-exempt interest. For California, the $150 of qualifying U.S. obligation interest may be subtracted, while the $200 from out-of-state municipal bonds may need to be added. The exact result depends on the security and supporting statement.
An early-withdrawal penalty in box 2 may qualify as an adjustment to income even when it exceeds the interest reported for the year. It is not simply netted against box 1 on the information form.
Bond premium can reduce reportable interest under the applicable election and instrument rules. Market discount may cause part of a bond's gain or accrued amount to be treated as ordinary interest. These rules are technical and can require elections that continue across years. Preserve acquisition records and broker supplemental schedules.
For 2025 returns, taxable interest generally appears on Form 1040 line 2b, while tax-exempt interest appears on line 2a. Schedule B may be required when taxable interest or ordinary dividends exceed the form's threshold or another trigger applies.
Schedule B also asks foreign-account and foreign-trust questions. Foreign tax in box 6 may support a foreign tax credit or deduction, but eligibility and Form 1116 requirements must be reviewed.
If a form is issued to a nominee for interest belonging to another person, the nominee may have reporting duties. Simply removing the other owner's portion from the return can leave an IRS mismatch.
California generally begins with federal adjusted gross income and uses Schedule CA (540) or Schedule CA (540NR) for differences. Common interest adjustments include:
Obtain the fund's state tax supplement. The words "government fund" or "municipal fund" do not prove full California exemption.
Heath Income Tax can classify interest, review bond and fund supplements, prepare Schedule B, and make the appropriate California adjustments.
Is interest taxable if I did not receive Form 1099-INT?
Generally yes. The reporting threshold does not create a tax exemption.
Is box 8 completely ignored because it is tax-exempt?
No. It is reported on the federal return and can affect other calculations. State treatment can differ.
Does California tax U.S. Treasury interest?
Qualifying interest from U.S. obligations is generally exempt from California personal income tax, though fund and instrument details matter.
When do I need Schedule B?
It can be required because of income totals or other situations, including nominee income and certain foreign-account or foreign-trust questions.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
Click a question or ask us your own.
Ask Us a Question
Message Sent!
Thank you — we'll get back to you as soon as possible.