Interest on
insurance dividends you leave on deposit with the Department of Veterans
Affairs, however, is not taxable. Interest on Series EE and Series I
U.S. Savings bonds generally does not have to be reported until you
redeem or dispose of the bonds or they mature. Interest from these bonds
may be excluded from income if you pay qualified higher educational
expenses during the year and meet other requirements. Refer to
Publication 550, Investment Income and Expenses, for detailed
information.
Certain distributions commonly referred to as dividends are actually
interest. They include "dividends" on deposits or share accounts in
cooperative banks, credit unions, domestic savings and loan
associations, federal savings and loan associations, and mutual savings
banks.
If you have a bond, note, or other debt instrument that was originally
issued at a discount, part of the original issue discount may have to be
included in your income each year as interest. Refer to Publication 550
or Publication 1212, List of Original Issue Discount Instruments, for
more information on original issue discount.
You must show on your tax return the amount of any tax exempt interest
you received during the tax year. This is an information reporting
requirement only, and does not convert tax exempt interest to taxable
interest.
You should receive a Form 1099-INT (PDF), Interest Income; Form 1099-OID
(PDF), Original Issue Discount; or a similar statement from each payer
of interest of $10 or more, showing the taxable interest you must
report. This information is often included on your year–end account
statement. Even if you do not receive a statement, you are still
responsible for reporting all taxable interest income.
If your taxable interest income is more than $1,500, be sure to show
that income on Schedule B of Form 1040 (PDF), or on Schedule 1 of Form
1040A (PDF). You cannot file Form 1040EZ (PDF) if your interest income
is more than $1,500. Even if your taxable interest income is $1,500 or
less, you need to show that income on the front of Form 1040, 1040A, or
Form 1040EZ.
If you received interest because you financed the sale of your home or
other property, report it on Schedule B of Form 1040 or Schedule 1 of
Form 1040A. If the buyer used the property as a personal residence, you
must also show the buyer's name, address, and social security number.
You must use Form 1040 to report interest in some situations. For
example, you cannot use Form 1040A or 1040EZ if you are reporting
original issue discount in an amount that differs from the amount shown
on Form 1099–OID, or if you received or paid accrued interest on a bond
transferred between payment dates. You must use Form 1040 or Form 1040A
if you received interest in your name as a nominee for the actual owner,
or you received a Form 1099–INT for U.S. savings bond interest that
includes amounts you reported before 2004.
If you received interest as a nominee for the actual owner, you need to
show that amount below a subtotal of all interest income listed on
Schedule B of Form 1040 or Schedule 1 of Form 1040A. Follow the form
instructions for nominees. You must prepare a Form 1099–INT for the
interest that is not yours and give Copy B to the actual owner. You must
also file a copy and a completed Form 1096 (PDF), Annual Summary and
Transmittal of U.S. Information Returns, with the Internal Revenue
Service Center.
Excludable interest from redeemed U.S. savings bonds used to pay
qualified higher education expenses is figured on Form 8815 (PDF) and
shown on Schedule B of Form 1040 or Schedule 1 of Form 1040A.
If you receive taxable interest, you may have to pay estimated tax.
Refer to Topic 355 for additional information on estimated tax.
You must give the payer of your interest income your correct social
security number. If you do not, you may be subject to a penalty and
backup withholding. Refer to Topic 307 for information on backup
withholding.
For more information on interest income, refer to Publication 550
