1099 Investment Income: Reporting, NIIT, and Wash Sales

The 1099 forms your broker or bank sends report investment income to both you and the IRS, and each form type gets reported differently on your return: interest from a 1099-INT is ordinary income added to your wages, dividends from a 1099-DIV split between ordinary and qualified rates, and sales from a 1099-B flow through Form 8949 to Schedule D as capital gains or losses. The IRS receives a copy of every 1099 you do, so what you file needs to match. Here’s how each form maps to your return and what rate applies.

Identify Which 1099 You Received

Most investors get a consolidated statement from their broker that bundles several 1099s together. Each one covers a distinct type of income and lands in a different place on your return.

Form 1099-INT reports taxable interest from bank accounts, CDs, corporate bonds, and similar sources. Box 1 is taxable interest, Box 3 is interest from U.S. Treasury obligations, and Box 8 is tax-exempt interest from municipal bonds.¹
Form 1099-DIV reports dividends from stocks, mutual funds, and REITs. Box 1a is total ordinary dividends, Box 1b is the portion that qualifies for lower rates, Box 2a is capital gain distributions, and Box 3 is nontaxable return of capital.²
Form 1099-B reports proceeds from the sale of stocks, bonds, mutual fund shares, and other securities, along with acquisition and sale dates and, for covered securities, cost basis in Box 1e.³
Form 1099-OID reports original issue discount on bonds bought below face value. The discount is treated as taxable interest spread over the life of the bond, even without a cash payment.⁴
Form 1099-DA is new for the 2026 tax year and reports proceeds from digital asset transactions handled through a broker. It works like a 1099-B for cryptocurrency and similar assets.⁵

Reporting Interest From a 1099-INT or 1099-OID

Interest is ordinary income taxed at your marginal rate. Add the Box 1 amount from Form 1099-INT, and any Box 1 amount from Form 1099-OID, to the interest line on Form 1040. If your total taxable interest or ordinary dividends exceed $1,500, itemize the sources on Schedule B.⁶

Treasury interest in Box 3 is taxable federally but exempt from state income tax, so track it separately when you file your state return. Municipal bond interest in Box 8 is generally exempt from federal tax but still gets reported on Line 2a of Form 1040.⁶ One catch: interest from certain private activity municipal bonds, shown in Box 9 of Form 1099-INT, can trigger the alternative minimum tax even though it is otherwise tax-exempt.⁷

Accrued Interest You Paid the Seller

If you bought a bond between interest payment dates, part of the price you paid was accrued interest owed to the seller. Your 1099-INT may include that accrued interest even though it isn’t really yours. Report the full amount from the 1099-INT on Schedule B, then subtract the accrued interest on a separate line labeled “Accrued Interest.”⁶

Reporting Dividends From a 1099-DIV

Dividends come in two flavors with very different tax bills. Ordinary dividends in Box 1a are taxed at your regular rate. Qualified dividends in Box 1b get the same preferential rates as long-term capital gains: 0%, 15%, or 20%, depending on taxable income.⁸ For 2026, the 0% rate applies to taxable income up to $49,450 single and $98,900 joint. The 20% rate begins above $545,500 single and $613,700 joint. Everyone in between pays 15%.

A dividend only qualifies for the lower rate if you held the underlying stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Miss that window and the dividend is taxed as ordinary income regardless of what Box 1b says. Your broker doesn’t always know your full holding history across accounts, so the qualified figure on the 1099-DIV can be slightly off.⁸

Box 3 shows nontaxable return of capital. It isn’t income; it reduces your cost basis in the investment. Once return-of-capital payments exceed your entire basis, additional amounts become capital gains reported on Schedule D.⁹

Box 5 shows Section 199A dividends, which are qualified REIT dividends that may entitle you to a 20% deduction on that income. If you hold REITs in a taxable account and see an amount in Box 5, you’ll need Form 8995 or Form 8995-A to claim the deduction.⁹

Reporting Sales From a 1099-B

When you sell stocks, bonds, mutual fund shares, or other securities, the transactions from Form 1099-B feed into Form 8949 and then into Schedule D. You calculate the gain or loss on each sale by subtracting your cost basis from the proceeds.¹⁰

Form 8949 separates transactions into short-term and long-term. A sale is short-term if you held the asset for one year or less, counting from the day after acquisition through the day of sale, and short-term gains are taxed as ordinary income. A sale is long-term if you held the asset more than one year, and it qualifies for the 0%, 15%, or 20% rates.¹¹

Your broker reports cost basis of covered securities in Box 1e. Securities acquired after certain cutoff dates (generally 2011 for most stocks, 2012 for mutual fund shares, and 2014 or later for bonds and options) are covered, meaning the broker tracked basis and reported it to the IRS. For noncovered securities, Box 1e may be blank, and you’re responsible for calculating and entering the correct basis yourself.³

After you list every sale on Form 8949, the subtotals carry to Schedule D, which nets short-term and long-term gains and losses against each other. The result determines what you owe and at what rate.¹⁰

Worthless Securities

If a stock or bond becomes completely worthless, you can claim a capital loss even without a sale. The IRS treats worthless securities as if they were sold on the last day of the tax year they became worthless. Classify the loss as short-term or long-term based on how long you held it, and report it on Form 8949 like any other sale.¹²

Wash Sales Can Disallow a Loss on Your 1099-B

The wash sale rule blocks you from selling an investment at a loss and immediately buying it back for the tax deduction. If you purchase a substantially identical security within a 61-day window that runs from 30 days before the sale through 30 days after, the IRS disallows the loss.¹³

The disallowed loss isn’t gone. It gets added to the cost basis of the replacement shares, deferring the tax benefit until you sell those. Brokers track wash sales inside a single account and report the adjustments on your 1099-B, but they can’t see across accounts. If the sale and repurchase happen in different accounts, or between a taxable account and an IRA, you have to make the adjustment yourself. That is where most people get caught.

When Losses Exceed Gains

Capital losses first offset capital gains dollar for dollar with no limit. If losses still exceed gains after that, you can deduct up to $3,000 of the net loss against ordinary income, or $1,500 if married filing separately.¹⁴ Anything left over carries forward indefinitely. You apply the carryforward using the Capital Loss Carryover Worksheet in the Schedule D instructions.¹¹

A brutal year in the market doesn’t produce a giant one-time deduction. Lose $50,000 with no gains and you deduct $3,000 this year, carrying $47,000 forward. It takes patience, but the loss doesn’t expire.

The 3.8% Net Investment Income Tax

Higher-income investors face an additional 3.8% Net Investment Income Tax on top of regular income and capital gains rates. The tax applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds the threshold for your filing status:¹⁵

Single or head of household: $200,000
Married filing jointly: $250,000
Married filing separately: $125,000

These thresholds are not indexed to inflation and haven’t changed since the tax took effect in 2013. Net investment income here includes interest, dividends, capital gains, rental income, and annuity income. If you’re above the threshold, report the tax on Form 8960. It’s the kind of tax that surprises people after a big year of gains from a concentrated stock position or a home sale.

Foreign Tax Withheld on Dividends

If you hold international stock funds or individual foreign stocks, the country where those companies are based may withhold tax on your dividends. Box 7 of Form 1099-DIV shows the amount withheld. You can claim a foreign tax credit that reduces your U.S. tax bill dollar for dollar.

You can claim the credit directly on Schedule 3 without filing Form 1116 if you meet all three of these conditions: your total creditable foreign taxes are $300 or less ($600 if married filing jointly), all the foreign-source income is passive income like dividends and interest, and the income and taxes were reported on a qualified payee statement such as Form 1099-DIV.¹⁶ Above those amounts, or with any nonpassive foreign income, you’ll need Form 1116.

Paying Tax on Income That Wasn’t Withheld

Unlike wages, income reported on 1099 forms typically has no tax withheld. If you’ll owe $1,000 or more beyond what your job’s withholding covers, you generally need to make quarterly estimated tax payments. The due dates are April 15, June 15, September 15, and January 15 of the following year.¹⁷

You avoid the estimated tax penalty if you pay at least 90% of your current-year tax or 100% of last year’s tax, whichever is less. If your prior-year adjusted gross income was above $150,000 ($75,000 if married filing separately), that 100% safe harbor rises to 110%. Investors with unpredictable capital gains often find it easier to increase withholding from a W-2 job than to calculate quarterly payments, since the IRS treats withholding as paid evenly through the year regardless of when it happened.¹⁷

Late, Missing, or Corrected 1099s

Not every 1099 arrives on the same schedule. Forms 1099-INT and 1099-DIV must be mailed by January 31, but Form 1099-B and consolidated brokerage statements have a later deadline of February 15 (February 17, 2026, because of the weekend).¹⁸ Many brokers issue revised consolidated statements weeks later when they get corrected data from fund companies, so waiting until mid-March to file can save headaches.

If a 1099 never shows up, ask the broker or bank for a duplicate. If figures on a received form are wrong, request a corrected version with the “Corrected” box checked. You’re responsible for reporting all income you actually earned, whether or not the paperwork arrived. Use your account statements as backup if you need to.

If sorting out missing or corrected forms will push you past April 15, file Form 4868 for an automatic six-month extension. The extension gives you more time to file but does not extend the time to pay. If you owe tax and don’t pay by April 15, you’ll face interest and a late-payment penalty of 0.5% per month on the unpaid balance, up to 25%.¹⁹

What Happens If You Leave a 1099 Off Your Return

Because the IRS receives every 1099 your broker sends, unreported investment income is one of the easiest discrepancies for the IRS matching system to catch. Leaving income off due to negligence or carelessness can bring a 20% accuracy-related penalty on the resulting underpayment.²⁰

The typical process starts with a CP2000 notice, an automated letter saying the income on your return doesn’t match what was reported to the IRS. You can respond, but if the IRS is right and you simply forgot a 1099, you’ll owe the additional tax plus interest from the original due date, with the penalty on top. Keeping a checklist of every 1099 you expect, and comparing it against what arrives in January and February, is the simplest way to keep the matching system quiet.

1
Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID
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Internal Revenue Service. Instructions for Form 1099-DIV (01/2024)
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Internal Revenue Service. Instructions for Form 1099-B (2026)
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Internal Revenue Service. Form 1099-OID (Rev. January 2024) Original Issue Discount
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Internal Revenue Service. Form 1099-DA 2026 Digital Asset Proceeds From Broker Transactions
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Internal Revenue Service. Instructions for Schedule B (Form 1040) (2025)
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Internal Revenue Service. Form 1099-INT (Rev. January 2024)
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Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed
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Internal Revenue Service. Form 1099-DIV Dividends and Distributions (Rev. January 2024)
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Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Topic No. 409, Capital Gains and Losses
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Internal Revenue Service. Losses (Homes, Stocks, Other Property) 1
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Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities
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Office of the Law Revision Counsel. 26 U.S. Code 1211 – Limitation on Capital Losses
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Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax
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Internal Revenue Service. Instructions for Form 1116 (2025)
17
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
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Internal Revenue Service. General Instructions for Certain Information Returns (2025)
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Internal Revenue Service. Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
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Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments