Form 1099-INT Basics

The IRS Form 1099-INT (Interest Income) is used by banks, financial institutions, and other entities to report interest income paid to their customers during the tax year.

In general, if the account holder receives $10 or more in interest income, the payor must file Form 1099-INT and provide the recipient with a copy.

Sample Video Tutorial

The topic covered in this video tutorial and blog post covers Form 1099-INT, which reports municipal bond interest income for the 2023 tax year.

Generally, municipal bond interest is exempt from federal income taxes and is reported in Box 8 of Form 1099-INT as tax-exempt interest income. In this example, the account holder has $25 of taxable interest income, $300 of tax-exempt municipal bond interest, and $75 of private activity bond interest.

The taxpayer reports the $25 of interest income on Schedule B (Interest & Dividends) because it is taxable interest income subject to federal and state income taxes.

The taxpayer excludes the $300 of tax-exempt municipal bond interest from Schedule B because it is excluded from federal taxable income. However, the taxpayer must still disclose the amount of tax-exempt interest on Page 1, Line 2a, of Form 1040 (US Individual Income Tax Return).

The private activity bond (PAB) interest is a component of the Box 8 tax-exempt interest income. PAB interest is exempt from regular federal income tax but not from the alternative minimum tax (AMT). The taxpayer reports the $75 PAB amount as an adjustment on Form 6251 (Alternative Minimum Tax for Individuals).

Key Elements on Form 1099-INT for 2023

Box 1: Interest Income: The gross taxable interest income received during the calendar year.

Box 2: Early Withdrawal Penalty: Penalties charged to the account holder for the early withdrawal of certain types of savings accounts, such as certificates of deposit.

Box 3: Interest on U.S. Savings Bonds and Treasury Obligations: Taxable interest from U.S. Treasury bonds, bills, notes, and savings bonds. Federal interest income is subject to federal income taxes; however, it is generally exempt from state income taxes.

Box 4: Federal Income Tax Withheld: Any federal income tax withheld under the backup withholding rules under IRC Section 3406.

Box 6: Foreign Taxes Paid: If the amount of interest income includes any foreign source interest income that was subject to foreign withholding taxes, the foreign tax withheld is generally passed to the account holder and can be used as a foreign tax credit (FTC). FTC for individuals is reported on Form 1116 (Foreign Tax Credit).

Box 8: Tax-Exempt Interest: Interest income that is exempt from federal income tax, such as municipal bond interest income. Although the interest may be exempt from federal income taxes, it may be subject to state income taxes, depending upon your residency.

Box 9: Specified Private Activity Bonds Interest: The amount in Box 9 represents the portion of tax-exempt interest income that is private activity bond (PAB) interest income. PAB interest income is subject to special tax rules for alternative minimum tax (AMT) purposes.

Box 11: Bond Premium: The bond premium amortization on tax-exempt bonds.

Box 15: State: The state abbreviation in Box 15 indicates which state issued the municipal bonds reported in Box 8. This information is important for residents of states that impose income taxes.

Other Helpful Resources

Additional Information on Interest Income

Taxpayers can find more information on 1099-INT by visiting the form instructions and IRS Publication 550 (Investment Income and Expenses).