If you’re looking for Line 8b on Form 1040 to report your taxable interest, that line no longer exists under that number. The IRS renumbered it when it redesigned Form 1040 for tax year 2018, and taxable interest income now goes on Line 2b.1Internal Revenue Service. 2025 Form 1040 – U.S. Individual Income Tax Return Line 2a, just above it, holds tax-exempt interest. Together those two lines account for every dollar of interest you earned during the year, and the taxable figure on 2b feeds directly into your adjusted gross income.
What Goes on Line 2b (and What Doesn’t)
Almost every dollar of interest from a U.S. financial institution belongs on Line 2b. That covers savings and checking accounts, certificates of deposit, money market accounts, and corporate bonds. It also picks up some items people forget: interest the IRS paid you on a refund, the value of a promotional gift for opening a bank account above certain thresholds, and interest on insurance dividends left on deposit with the insurer.2Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses If you seller-financed a mortgage, the interest portion of each payment you receive is ordinary income reported the same way.3Internal Revenue Service. Topic No. 705, Installment Sales
Interest on U.S. Treasury bills, notes, bonds, and savings bonds is taxable federally but exempt from state and local income tax.4Internal Revenue Service. Topic No. 403 – Interest Received You still report the full amount on Line 2b for federal purposes. Interest from state and local municipal bonds, by contrast, is generally federally tax-exempt and goes on Line 2a.
When You Need Schedule B First
Each bank, brokerage, or other payer that paid you $10 or more in interest during the year must send a Form 1099-INT.5Internal Revenue Service. About Form 1099-INT, Interest Income Box 1, “Interest income,” is the number you’re after. Add Box 1 across every 1099-INT you receive, and that total is normally your starting figure for Line 2b.
If your total taxable interest from all sources exceeds $1,500, you must file Schedule B with your return.6Internal Revenue Service. Instructions for Schedule B (Form 1040) Schedule B is also required if you received interest as a nominee or have certain other complex situations, even when the total is $1,500 or less. On Schedule B, you list each payer and their amount in Part I, then carry the final total to Form 1040, Line 2b.7Internal Revenue Service. 2025 Schedule B (Form 1040) If your total is $1,500 or less and you have no special situations, you can skip Schedule B and enter the total directly on Line 2b.
Adjustments That Change the Number You Enter
The raw total from your 1099-INT forms is not always the final figure. Several adjustments happen on Schedule B before the number moves to Line 2b.
Nominee Interest
If a 1099-INT was issued in your name but part of the interest actually belongs to someone else, say a joint account where the other person’s share was reported under your Social Security number, report the full amount on Schedule B, then subtract the other person’s portion and label it “Nominee Distribution.”6Internal Revenue Service. Instructions for Schedule B (Form 1040) You’ll also need to issue a 1099-INT to the actual owner for their share.
Accrued Interest on Bonds
When you buy a bond between interest payment dates, you typically pay the seller for interest that accrued before you owned it. When the next full interest payment lands in your account, you can subtract the accrued interest you paid. Report the full 1099-INT amount on Schedule B, then enter the subtraction labeled “Accrued Interest.”6Internal Revenue Service. Instructions for Schedule B (Form 1040)
Original Issue Discount
Original issue discount (OID) is the built-in gain on a bond bought for less than face value at maturity. You don’t receive the gain until the bond matures or is sold, but the IRS still requires you to report a portion as interest each year. Your broker reports the annual amount on Form 1099-OID, and you fold it into the Schedule B interest total.8Internal Revenue Service. About Form 1099-OID
Bond Premium Amortization
If you paid more than face value for a taxable bond, you can elect to amortize that premium over the bond’s remaining life and use it to offset the interest income you report each year. On Schedule B, subtract the annual amortization amount below your interest subtotal and label it “ABP Adjustment.” The election is binding once made: it applies to every taxable bond you own now and in the future, and you need IRS approval to revoke it.2Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
Early Withdrawal Penalties
If you cashed in a CD before it matured and the bank charged a penalty, that penalty appears in Box 2 of your 1099-INT. Report the full Box 1 interest on Line 2b, but deduct the penalty separately on Schedule 1 of Form 1040. It’s an above-the-line deduction, so it reduces your AGI whether or not you itemize.
Interest You Might Otherwise Miss
The $10 threshold is a reporting rule for the payer, not an exemption for you. If a bank paid you $6 in interest and never issued a 1099-INT, you still owe tax on that $6 and it still belongs on Line 2b. December account statements usually show a year-to-date interest total you can use.
You also owe tax on interest when it’s credited, not when you withdraw it. Under the constructive receipt doctrine, if the money is available to you without restriction, the IRS treats it as received.9eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income So $200 posted to your savings account on December 31 is taxable in that year even if you never touch it. Interest subject to a substantial early-withdrawal penalty, like a CD that hasn’t matured, is the main exception: it may not be considered available without restriction until maturity or until a penalty is assessed.
If you expected a 1099-INT and it hasn’t arrived by mid-February, contact the payer directly, or call the IRS at 1-800-829-1040. Don’t delay filing over a missing form. Use your statements to calculate the interest, report it, and if a 1099-INT later shows a different figure, file an amended return on Form 1040-X.10Internal Revenue Service. 2025 Instructions for Form 1040
Interest earned in a foreign bank account is taxable in the U.S. and goes on Line 2b like any other interest. Foreign accounts also trigger separate filings such as the FBAR with FinCEN and possibly Form 8938, which sit outside Form 1040 itself but should not be overlooked.11FinCEN.gov. Report Foreign Bank and Financial Accounts
Why the Number on Line 2b Matters Beyond Itself
Line 2b feeds directly into adjusted gross income, and AGI is the yardstick the IRS uses for nearly everything else on your return. A higher AGI can shrink or eliminate the Child Tax Credit and education credits, push more of your Social Security benefits into taxable territory, and trigger surtaxes you wouldn’t otherwise owe. A sudden spike from a maturing CD or bond portfolio often catches people off guard when they see the finished return.
Net Investment Income Tax
Interest reported on Line 2b counts as investment income under Section 1411 of the Internal Revenue Code.12Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax If your modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly), you owe a 3.8% surtax on the lesser of your net investment income or the amount by which your MAGI exceeds that threshold.13Internal Revenue Service. Net Investment Income Tax These thresholds are not indexed for inflation, so more taxpayers cross them each year.14Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
Social Security Benefits
If you receive Social Security and also earn interest, that interest can push your provisional income past the point where benefits become taxable. Provisional income is your AGI plus tax-exempt interest plus half your Social Security benefits. Above $25,000 (single) or $32,000 (joint), up to 50% of benefits become taxable. Above $34,000 (single) or $44,000 (joint), up to 85% can be taxed.15Internal Revenue Service. Social Security Income These thresholds have never been adjusted for inflation, so even modest interest can tip the balance for retirees.
Getting Line 2b Wrong
The IRS receives a copy of every 1099-INT issued in your name. Its automated matching program compares those forms against what you reported, and unreported interest is one of the easiest mismatches for the system to catch. If the IRS determines the omission was due to negligence, the accuracy-related penalty is 20% of the underpayment attributable to the error, and the agency specifically lists “not including income shown in an information return” as an example of negligence.16Internal Revenue Service. Accuracy-Related Penalty
A separate 20% penalty applies for a “substantial understatement” of income tax, defined as understating your tax by the greater of 10% of the correct tax or $5,000.16Internal Revenue Service. Accuracy-Related Penalty Interest on the unpaid tax runs from the original due date on top of any penalty. Small amounts of unreported interest can compound into real money by the time a notice arrives, which is why the safest habit is to gather every 1099-INT plus your December statements before you touch Line 2b.