MONEY: BANK BONUSES, INTEREST MAY BOOST TAX BILL

With tax season in full swing, you may be consolidating the various charitable donation receipts, deductions and W-2 forms that you’ll submit to the Internal Revenue Service. But if you received any bank sign-up bonuses or earned interest on your bank balance, you may owe additional taxes you might not have planned for

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Interest rates on bank accounts, such as high-yield savings accounts, were high in 2022 due to ongoing rate increases made by the Federal Reserve. Bank sign-up bonuses and promotions have also been high, often $100 or more. The IRS sees bonuses and interest as additional income, which means the government has to take its cut.

WHAT’S THE TAX RATE FOR BANK INTEREST AND BONUSES?

Interest from savings accounts is taxed at the same rate as your income, which is in the range of 10%-37% in the United States in 2023. If you’ve earned interest, your bank may send you a 1099-INT tax form. These forms are issued by businesses that offer interest, such as banks, and they let you know how much you owe for taxes on your earned interest.

Bank bonuses are typically taxed the same way, although you might receive a 1099-MISC form instead of, or in addition to, a 1099-INT form. Sometimes, however, banks don’t send out forms at all. “Not all financial institutions send out 1099s for bank bonuses,” said Matt Bundrick, co-founder of BankBonus.com, by email. “However, this does not relieve you from your obligation to include them on your tax return.”