To report CD interest on Form 1099-INT, take the amount in Box 1 and enter it on Line 2b of your Form 1040. If your combined interest from all sources for the year is more than $1,500, list each payer on Schedule B first, and the total flows to that same Line 2b.1Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends If you broke a CD early and the bank charged a penalty, that number sits in Box 2 and comes off your income separately on Schedule 1.
What to Look at on the 1099-INT
Your bank or credit union sends you Form 1099-INT by January 31 for any account that earned at least $10 in interest during the year, and files a copy with the IRS.2Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID3Internal Revenue Service. Publication 1099 (2026), General Instructions for Certain Information Returns For a plain bank CD, only two boxes really drive your return:
- Box 1 shows the total taxable interest credited during the year. This is the figure you actually report as income.
- Box 2 shows any early withdrawal penalty the bank charged you for cashing out before maturity. This is a deduction, handled separately from Box 1.
A few other boxes may have entries you should recognize. Box 3 carries U.S. Treasury interest, which is taxable federally but exempt from state and local tax; on a standard bank CD it will be zero.4TreasuryDirect. Tax Information for EE and I Bonds Box 4 shows federal income tax withheld, which most CD holders will not see; it appears only if the IRS required backup withholding at 24%, usually because of a missing or incorrect taxpayer identification number.5Internal Revenue Service. Backup Withholding Anything in Box 4 counts as a tax payment on your return. Box 8 is tax-exempt interest, which does not apply to standard CDs.
Getting the Interest onto Your 1040
Take the Box 1 figure and put it on Line 2b of Form 1040 as taxable interest. If a single CD at a single bank is your only source of interest for the year, that is the entire task.
Once your total taxable interest from every source combined tops $1,500, the IRS also wants Schedule B.6Internal Revenue Service. Schedule B (Form 1040) – Interest and Ordinary Dividends On Schedule B, Part I, you list each payer (each bank or brokerage that sent you a 1099-INT) and the amount from each. Add them up, and the total lands on Line 2b of your 1040. Tax software handles this in the background once you enter the individual forms.
If your CD earned less than $10, you probably will not get a 1099-INT in the mail. The interest is still taxable and still belongs on Line 2b.7Internal Revenue Service. Topic No. 403, Interest Received Pull the number from your December statement or online banking and report it.
Timing matters too. CD interest is taxable in the year it is credited to your account, not the year you eventually take the money out. If you hold a multi-year CD that credits interest annually, you owe tax on each year’s interest as it posts, even if the CD is locked and you have not touched it.8eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income
Deducting an Early Withdrawal Penalty
If Box 2 has a number, you can deduct the full penalty from your income. It goes on Line 18 of Schedule 1, and the total from Schedule 1 flows into the adjustments section of your 1040, lowering your adjusted gross income.9Internal Revenue Service. 2025 Instructions for Form 1040 This is an above-the-line deduction, so you get it whether you itemize or take the standard deduction.
Here is where people make the common mistake: do not net the penalty against the interest before reporting. Box 1 still goes on Line 2b in full. The Box 2 penalty is a separate line item on Schedule 1. Reporting it any other way understates your interest income and overstates or understates your deduction.10Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
If the 1099-INT Does Not Arrive
Contact the bank first. Most institutions post the form inside online banking before the paper copy ever hits the mail. If you still cannot get it by mid-February, the IRS assistance line is 1-800-829-1040.
You do not need the physical form to file. Your December statement or year-end online summary shows what the account earned, and that figure is enough to enter on your return. If a 1099-INT arrives later with a different number, correct the return using Form 1040-X.7Internal Revenue Service. Topic No. 403, Interest Received
Situations That Change How You Report
The Line 2b path assumes a standard bank CD held in your own taxable account. Some cases work differently.
Long-Term CDs on Form 1099-OID
If a CD has a term longer than one year and does not pay interest at least annually, or was issued at a discount, the bank reports the accrued interest on Form 1099-OID instead of 1099-INT.11Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID (01/2024) You still owe tax each year as the discount accrues, even though no cash reaches you until maturity.10Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses The bank calculates the annual amount for you.
Brokered CDs Bought Between Payment Dates
If you bought a brokered CD partway through an interest period, you paid the seller for interest that had already accrued before you owned the CD. Your brokerage will still issue you a 1099-INT for the full period’s interest. Report the full amount on Schedule B, then subtract the accrued interest you paid, labeling the subtraction “Accrued Interest” underneath the interest total.12Internal Revenue Service. Instructions for Schedule B (Form 1040) Miss this step and you pay tax on interest that was never yours.
Interest That Belongs to Someone Else
If a CD sits in your name but some of the interest belongs to another person, the bank still issues the 1099-INT to you for the whole amount. Report the total on Schedule B, then subtract the other person’s share as a “Nominee Distribution.”13Internal Revenue Service. Instructions for Schedule B (Form 1040) You are also required to issue that person a 1099-INT for their share and send a copy to the IRS with Form 1096.
CDs Inside a Retirement Account
A CD held inside a traditional IRA or 401(k) generates no 1099-INT. Interest compounds tax-deferred, and tax is owed when you take distributions, reported on Form 1099-R rather than 1099-INT.14Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions Inside a Roth IRA, qualified distributions are tax-free.
A CD in a Child’s Name
For 2026, the first $1,350 of a child’s unearned income is tax-free, the next $1,350 is taxed at the child’s rate, and anything above $2,700 is taxed at the parent’s marginal rate under the kiddie tax rules.15Internal Revenue Service. Rev. Proc. 2025-32 These rules apply to children under 19, or under 24 if a full-time student.
Net Investment Income Tax
CD interest counts as investment income for the 3.8% Net Investment Income Tax, which applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately).16Internal Revenue Service. Net Investment Income Tax These thresholds do not adjust for inflation.
Foreign CDs
Interest from a CD at a foreign bank is still taxable to a U.S. person and reported the same way on your 1040. Depending on account values, you may also need to file an FBAR (FinCEN Form 114) if your foreign accounts combined exceeded $10,000 at any point in the year, and Form 8938 under FATCA if you cross its higher thresholds.17FinCEN.gov. Report Foreign Bank and Financial Accounts18Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets These are separate filings; the same account can trigger both.
Nonresident Aliens
Interest earned by a nonresident alien on a deposit at a U.S. bank, credit union, or savings institution is generally not subject to U.S. income tax as long as it is not connected to a U.S. trade or business, and a 1099-INT is typically not issued.19Internal Revenue Service. Nontaxable Types of Interest Income for Nonresident Aliens