How to Read Your 1099-INT Form. Not all interest income is taxed the same way. There are a few different kinds of interest income and they are reported in different boxes on the 1099-INT. This article shows you how to understand what you see on your 1099-INT.
The first couple of boxes on the 1099-INT are pretty straightforward. Box 1 of your 1099-INT form shows regular taxable interest, like bank account interest, that is taxed as ordinary income (meaning at your top marginal tax rate.)
Box 2 of your 1099-INT shows any amount you paid in early withdrawal penalties from CDs or other securities. This amount can be carried to Schedule A of the 1040 as a miscellaneous investment expense.
Box 3 of your 1099-INT shows interest you received from U.S. Government securities, such as T-bills, notes and bonds. This income is only taxable at the federal level. No state or local tax is assessed on U.S. Government interest. Some of this interest may be excluded from taxation altogether, depending upon certain factors. The numbers from boxes 1,2 and 3 are all carried to Schedule B of the Form 1040.
Box 6 shows foreign tax paid. This is tax that you paid during the year on a foreign investment, such as an international mutual fund. This number will be carried to the 1040 and used as either a credit or deduction.
Box 8 shows tax-free interest, such as interest that is paid from a municipal bond. This number is also carried to the 1040 to be used in performing certain calculations.
For more information on the Form 1099-INT, visit the IRS website at irs.gov (see link below). Type in "interest" or "1099-INT" in the search bar and a list of related topics will come up.
This article is intended as a general guide and should not be construed as specific tax advice. If you have further questions on this subject, you should consult your tax advisor.
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