Who Pays Taxes on Interest Earned on a Joint Bank Account?
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Sharing a bank account with a partner or relative can make it easier for you to manage your funds together. But this can also lead to some confusion in the tax season.
You must report and pay taxes to understand the interest you earned on your deposit account. How does this work when you have an account together? Continue reading to find out.
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Who pays tax on interest on a joint bank account?
The interest you earn on most standard bank accounts is taxable. This includes checking and savings accounts, CDs, corporate bonds and deposit insurance dividends. When you earn interest on a joint bank account, all bank account owners must pay taxes on part of theirs.
“So, if the joint account is owned by four owners, each person will pay taxes on the 25% interest earned in the year,” said Logan Alec, owner of the CPA and tax relief company. Choose tax relief.
How to know how much interest you have gained
Your bank or credit union should send you Form 1099-Int Show any interest on your account exceeds $10. But you have to report any interest you earn on your deposit account, even if the account is less than $10. You can check your account statements to see how much your account earns during the tax year.
Not every account owner can receive this form. Alec said the bank will typically provide the interest earned throughout the year to major account holders on Form 1099-INT.
If you are the primary account holder and receive this form, you are responsible for telling other account holders what interest the account receives over the year and what portion of this interest they should report.
To do this, you will fill out a 1099-Int form for each joint owner, detailing the interest earned and its percentage liability. You can find specific instructions on how to fill in 1099-Int IRS website. Once you have filled out 1099-INT for each joint account holder, you can grant this form to account holders so they can use it to tax.
If you are married and submit together, the process will be different. (More content below.)
How to report interest earned in joint accounts
Major account holders have to do more work when reporting interest on joint bank accounts, but all joint owners follow similar procedures.
“Under its own tax return, the main account holder should report the total amount reported in Form 1099-Int and then subtract the interest shares of the other owners as ‘nominee allocation’,” ALLEC said. This shows that not all interest income in the joint account belongs to you, so you only have to pay share tax.
All account holders must note their allocation when submitting their personal tax forms. If you earn $1,500 or less from total interest or dividend income in 2025, you can write down your interest income on the appropriate line on Form 1040. If you get over $1,500, you will need to fill out Schedule B and attach it to 1040.
- Write the total interest earned in the account.
- Write the nomination distribution.
- Subtract taxable interest that is not yours.
This process will be different if the joint account owner is also a spouse who is a married spouse who is co-submitted.
“If you only have a joint bank account with your spouse and your spouse profile, you don’t have to worry about any nominee distribution issues, as your and spouse’s income is combined in your joint tax return anyway,” Allec said.
If you need help, please contact a CPA or a tax attorney to guide you through the complex tax filing process
What is the tax rate for the Union Bank Account Rate?
The amount of tax you pay depends on your tax rate.
“Interest on a taxable account is usually taxed as ordinary income, which means you pay the same tax rate as your salary,” Allec said.
This is the tax rate you can pay interest income for the 2024 tax year based on your income.
If you are a single filer or filed separately:
- $0-$11,600: 10%
- $11,601- $47,150: 12%
- $47,151- $100,525: twenty two%
- $100,526- $191,950: twenty four%
- $191,951-$243,725: 32%
- $243,726- $609,350: 35%
- $609,351 and above: 37%
If you are married and submit:
- $0-$23,200: 10%
- $23,201- $94,300: 12%
- $94,301-$201,050: twenty two%
- $201,051- $383,900: twenty four%
- $383,901-$487,450: 32%
- $487,451-$731,200: 35%
- $731,201 and above: 37%
