Yes, bank bonuses are taxable. The IRS treats the cash you get for opening a checking, savings, or CD account as interest income, taxed at your ordinary income rate. Your bank reports it on Form 1099-INT alongside any regular interest the account earned, and you owe federal income tax on every dollar whether or not the bank sends you a form.
Why the IRS Calls It Interest, Not a Gift
A gift, in tax terms, has no strings attached. A bank bonus always does: you open an account, deposit a minimum amount, keep it there for a set period, or route a direct deposit through it. The bank is paying you for the use of your money, which makes the payment interest under the tax code. IRS Publication 550 addresses this directly, treating cash and gifts received for opening accounts or making deposits as reportable interest.1Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
How Your Bank Reports the Bonus
When a bank pays you $10 or more in bonuses and interest during a calendar year, it must send you Form 1099-INT and file a copy with the IRS.2Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID (01/2024) The bonus shows up in Box 1, “Interest Income,” usually lumped in with any regular interest the account earned. Open accounts at three different banks and you should expect three separate 1099-INTs.
That $10 threshold only controls whether the bank has to send the form. It doesn’t control whether you owe the tax. A $5 bonus from a small promotion is still taxable interest, and you’re responsible for reporting it even if no form arrives.3Internal Revenue Service. Topic No. 403, Interest Received
Where the Bonus Goes on Your Return
Report the bonus as interest income on your Form 1040. If your total interest from all sources for the year is $1,500 or less, you enter the number directly on the 1040. Cross $1,500 and you also have to file Schedule B, which lists each payer and the amount received.4Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends5Internal Revenue Service. 2025 Schedule B (Form 1040)
If you chase several bonuses in one year, this threshold is easy to hit. Three $300 bonuses plus normal savings interest already puts you over. Schedule B isn’t difficult, but forgetting it can slow your return.
For any bonus under $10 that didn’t produce a 1099-INT, add it to your interest total anyway. The IRS won’t have a matching form on file, but the income is still legally reportable.
Which Year the Bonus Counts In
A bank bonus is taxable in the year it becomes available to you, not the year you opened the account or completed the qualifying activity. Federal tax law counts income when it is actually or constructively received.6Office of the Law Revision Counsel. 26 USC 451 – General Rule for Taxable Year of Inclusion
This trips people up at year-end. If the bank credits your bonus on December 31, it’s income for that year even if you don’t touch the money until January. You are in constructive receipt the moment the funds are available to withdraw. Going the other direction, if you finished the qualifying activity in November but the promotion’s terms say the bonus won’t post until January, you generally don’t owe tax until January. Read the fine print if the timing matters to you.
Non-Cash Bonuses and Referral Payments
Some banks hand out tablets, headphones, gift cards, or small appliances instead of cash. Those are taxable too. Publication 550 values the item at the bank’s cost, not the retail sticker price, so a speaker the bank bought wholesale for $120 that retails at $199 is $120 of income to you.1Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses The same publication sets reporting thresholds for these gifts: for deposits under $5,000, items worth more than $10 (at the bank’s cost) get reported as interest; for deposits of $5,000 or more, the threshold rises to $20. Below those thresholds, the bank doesn’t have to report the gift, but the value is still income to you.
Banks sometimes classify non-cash rewards on Form 1099-MISC instead of 1099-INT. Referral bonuses, which most banks pay in the $50 to $100 range for signing up a friend, often land on 1099-MISC or 1099-NEC as well, because they aren’t really interest on your deposit. Either way, the money is ordinary income; just note which form you got so you report it on the right line.7Internal Revenue Service. Publication 525 (2025), Taxable and Nontaxable Income
Business Account Bonuses
If you opened a business checking or savings account and earned the bonus in connection with your trade or business, the income belongs on Schedule C rather than your personal interest line. Line 6 of Schedule C covers interest and other miscellaneous business income.8Internal Revenue Service. 2025 Instructions for Schedule C (Form 1040) For a sole proprietor the total tax works out the same, but the placement should match whatever 1099 the bank filed.
If the Bank Claws the Bonus Back
Most bonus offers require you to keep the account open and funded for a set window, often 90 to 180 days. Close early and the bank can pull the money back. If the clawback happens in the same calendar year as the bonus, the bank simply adjusts the 1099-INT to the net amount, and you only owe tax on what you kept.
The problem is a clawback that crosses tax years. You already reported and paid tax on the bonus. The IRS doesn’t let you amend the prior year just because you gave the money back. Instead, you claim a deduction in the repayment year.
For repayments over $3,000, the claim-of-right doctrine lets you compare your tax with a deduction to your tax without the deduction minus what the original year would have looked like without the income, and pay the lower figure.9Office of the Law Revision Counsel. 26 USC 1341 – Computation of Tax Where Taxpayer Restores Substantial Amount Held Under Claim of Right Most bank bonuses don’t reach $3,000, so this rule rarely applies.
For smaller repayments, the natural route would be a miscellaneous itemized deduction. Congress made the suspension of miscellaneous itemized deductions permanent in 2025, effective for tax years beginning after December 31, 2025.10Office of the Law Revision Counsel. 26 US Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions For 2026 and later, a clawback under $3,000 gives you no deduction at all. You paid tax on money you handed back. Worth knowing before you chase a bonus with requirements you might not meet.
What If You Don’t Report It
The IRS gets a copy of every 1099-INT your bank files. Its automated matching system compares those forms to your return, and mismatches produce a CP2000 notice proposing additional tax, interest, and often a penalty.
The accuracy-related penalty for negligence is 20% of the underpaid tax, and the IRS specifically lists leaving off income shown on an information return as an example.11Internal Revenue Service. Accuracy-Related Penalty A separate 20% substantial understatement penalty kicks in when the total understatement exceeds the greater of 10% of the correct tax or $5,000.12Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments A single missed bonus probably won’t hit that floor on its own, but stacked on other omissions it can.
Interest also runs on the unpaid balance from the original due date until you pay. The underpayment rate for the first quarter of 2026 is 7% per year, compounded daily.13Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
Don’t Forget State Tax
Most states with an income tax treat interest the same way the federal government does, so if you live in a state with a broad-based income tax, the bonus is almost certainly taxable there too. State rates on ordinary income run from around 2% to over 13% depending on the state and your bracket. A handful of states have no individual income tax, and residents there owe nothing beyond the federal bill. Check your state’s tax authority if you’re unsure how interest is treated where you live.