Form 1099-INT Basics for 2023

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 for 2023

The topic covered in this video tutorial and blog post covers Form 1099-INT, which reports treasury interest income paid to a bondholder during the 2023 tax year.

Interest income earned on debts issued by the federal government (e.g., U.S. savings bonds and other Treasury obligations) is subject to federal income taxes but is generally exempt from state income taxes.

The state income tax exemption makes these investments attractive to investors living in states with high state income tax rates.

In this example, the taxpayer receives a Form 1099-INT, which shows Box 1 taxable interest of $100 and Box 3 interest income of $450. The taxpayer is a full-time resident of Georgia, so he must report all of the interest income as taxable for federal tax purposes and exclude the $450 of federal interest from his state income tax calculation.

The taxpayer reports $550 of interest income on Schedule B (Interest & Dividends), which includes both the regular taxable interest (Box 1) and the U.S. savings interest (Box 3).

On the taxpayer’s Georgia Form 500, he adjusts his taxable income by ($450) to account for removing the U.S. savings and treasury interest income. The adjustment is required because the federal interest income is not subject to state income taxes.

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).