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Home> Income Tax Guide

Interest Income

Interest is the charge for the use of borrowed money. A common way to earn interest income is to deposit funds in a financial institution, such as a bank or credit union.

Most interest income is taxable-that is, it is subject to income tax. Tax-exempt interest income is not subject to income tax and is earned on funds loaned to states, cities, counties, or the District of Columbia.

In most cases, interest income is reported on Form 1099-INT. All taxable interest income is reported on the taxpayer's return, even if it is not reported on Form 1099-INT.

Interest - The charge for the use of borrowed money.

Interest income - The income a person receives from certain bank accounts or from lending money to someone else.

Taxable interest income - Interest income that is subject to income tax. All interest income is taxable unless specifically excluded.

Tax-exempt interest income - Interest income that is not subject to income tax. Tax-exempt interest income is earned from bonds issued by states, cities, or counties and the District of Columbia.