How to Report CD Interest on Your Tax Return: 1099-INT and Schedule B

To report CD interest on your tax return, add the Box 1 amounts from every Form 1099-INT you received and enter the total on Line 2b of Form 1040, labeled “Taxable interest.” If your total taxable interest and ordinary dividends from all sources come to more than $1,500, you also attach Schedule B and list each payer. That’s the whole mechanic for a typical CD held in a regular bank or brokerage account.

The rest depends on your situation: whether you broke the CD early, whether the account is joint, whether the CD defers interest for more than a year, and whether your income is high enough to trigger an additional tax on investment income.

What Your 1099-INT Shows

Any bank or credit union that paid you $10 or more in interest during the year must send you Form 1099-INT by January 31 and file a copy with the IRS.¹² Three boxes matter for CD holders:

Box 1 is total taxable interest for the year. This is the figure you carry to your return.
Box 2 is any early withdrawal penalty the institution charged. It gets its own line on Schedule 1, not netted against Box 1.
Box 3 is interest from U.S. Savings Bonds and Treasury obligations, federally taxable but generally exempt from state and local income tax.

Earned less than $10 and got no form? The interest is still taxable. The IRS requires you to report all taxable interest whether or not a 1099 arrives.³ Pull the number from your year-end statement.

Line 2b of Form 1040, and When Schedule B Kicks In

For most people with one CD or a couple of accounts, the entire job is entering the combined Box 1 total on Line 2b. No attachment needed.

You need Schedule B (Interest and Ordinary Dividends) if your combined taxable interest and ordinary dividends exceed $1,500, or if you have a foreign financial account.⁴ Part I of Schedule B is a simple list: each payer’s name and the interest amount from that payer. The Schedule B total then carries over to Line 2b. Watch the threshold: it applies to all your accounts combined, so multiple CDs plus a high-yield savings account can push you across it without any single payer looking large.

The Timing Rule That Trips People Up

CD interest is taxable in the year your bank credits it to the account, not the year you actually withdraw the money. The IRS treats interest on a deposit account as received once it’s available to you, even if pulling it out would trigger a penalty.⁵ A five-year CD that credits interest annually creates a tax bill each of those five years. You can’t wait until maturity.

A short CD that matures in a year or less and pays all its interest at maturity follows the same principle: report the interest in the year it’s paid or made available to you.⁵

Long-Term CDs That Defer Interest

A CD with a maturity longer than one year that defers all interest until the end is treated as an original issue discount (OID) instrument. You have to include a portion of the total interest in income each year even though you won’t see a payment until maturity.⁵ Your bank reports the accrued amount on Form 1099-OID rather than (or in addition to) 1099-INT.³ The OID amount goes on the same Line 2b of Form 1040.

If You Broke the CD Early

An early withdrawal penalty is not simply subtracted from your interest before you report it. Report the full Box 1 interest as income, then claim the Box 2 penalty as an adjustment on Schedule 1 (Form 1040), Part II, Line 18.⁶ The total from Schedule 1, Line 26, moves to Line 10 of your 1040 and reduces your adjusted gross income.⁷

This is an above-the-line deduction, so you get it whether you itemize or take the standard deduction. If the penalty was larger than the interest earned on that CD, you can still deduct the full penalty amount, and the excess reduces your other income.

Joint CDs and Nominee Distributions

When a CD is held jointly, the bank normally issues one 1099-INT under the primary holder’s Social Security number even though the interest belongs to all owners in proportion. The primary holder can’t just report their own share.

The correct process is a nominee distribution. Report the full 1099-INT amount on Schedule B, then subtract each co-owner’s share on a line labeled “Nominee Distribution” below the subtotal.⁴ The primary holder must also issue a 1099-INT to each co-owner for their share and send the IRS a copy with Form 1096 as the transmittal.² Each co-owner then reports their share on their own return. Spouses filing jointly can skip all of this because the interest already lands on the same return.

CDs Held Inside an IRA

If your CD is inside a traditional IRA, Roth IRA, or other tax-advantaged retirement account, none of the annual reporting above applies. You won’t get a 1099-INT for the interest while the CD sits in the account. For a traditional IRA, tax is owed only when you take distributions, at which point the withdrawal is taxed as ordinary income. Qualified Roth distributions come out tax-free. The Line 2b mechanics in this article are strictly for CDs in ordinary taxable accounts.

Extra Layers for Higher Incomes and Foreign Accounts

CD interest counts as net investment income, so it can pull you into the 3.8% Net Investment Income Tax if your modified adjusted gross income crosses these thresholds:⁸

$250,000 for married filing jointly or qualifying surviving spouse
$200,000 for single or head of household
$125,000 for married filing separately

The NIIT applies to the lesser of your net investment income or the amount by which MAGI exceeds the threshold, and you report it on Form 8960, with taxable interest entered on Line 1.⁹ These thresholds have not been adjusted for inflation since the tax took effect in 2013.

Interest from a CD at a foreign bank is taxed the same way, but you must complete Schedule B, Part III, regardless of the amount, to disclose the foreign account.¹⁰ Separately, if the combined value of all your foreign financial accounts exceeds $10,000 at any point during the year, you must file FinCEN Form 114 (the FBAR) electronically through FinCEN’s BSA E-Filing System, not with your tax return.¹¹

What Happens If You Skip It

Because the bank sends a copy of every 1099-INT to the IRS, unreported CD interest is one of the easiest mismatches for the IRS’s automated matching program to flag. The usual result is a CP2000 notice proposing additional tax. On top of the tax itself, the IRS can add a 20% accuracy-related penalty, and the agency specifically lists failing to report income shown on an information return like a 1099 as an example of the negligence that triggers it.¹² Interest also runs on the unpaid balance from the original due date.

If you’ve already filed and later receive a corrected 1099-INT that changes your Line 2b figure, file Form 1040-X to amend the return. If your 1099-INT hasn’t shown up by mid-February, start with the bank; if that doesn’t resolve it, the IRS can help at 800-829-1040.¹³

1
Internal Revenue Service. About Form 1099-INT Interest Income
2
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
3
Internal Revenue Service. Topic No. 403, Interest Received
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Internal Revenue Service. Instructions for Schedule B (Form 1040)
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Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses
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Internal Revenue Service. 2025 Schedule 1 (Form 1040)
7
Internal Revenue Service. 1040 (2025) Instructions
8
Internal Revenue Service. Topic No. 559, Net Investment Income Tax
9
Internal Revenue Service. Instructions for Form 8960 (2025)
10
Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
11
Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
12
Internal Revenue Service. Accuracy-Related Penalty
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Internal Revenue Service. What to Do When a W-2 or Form 1099 Is Missing or Incorrect