What is Interest Income and Form 1099-INT?
Who doesn't love a high-yield savings account? I know I do. After years of being paid pennies—yes, actual pennies—on money I was essentially loaning to the bank ( because that's exactly what we're doing when we deposit money ), I was getting played. My savings were earning interest rates way below 1 percent, sometimes as low as 0.01 percent. So crazy. Once I discovered high-yield savings accounts, I was all in. It felt amazing! Instead of earning pennies, I was now earning hundreds of dollars on my savings. This is the way it should be. But here's what I learned at the end of that first year: I received a tax form—a 1099-INT to be exact—that included my bank's name and, on line 1, the total amount of interest income paid to me during the calendar year. And guess what? This was taxable income! I had to report it when filing my taxes, and I owed taxes on the amount I earned. Hello, Interest Income! What is interest income? Simply put, it's the money you earn fr...