Interest income question

Forum|Forum|2 years ago
February 7, 2024
2 replies
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Hello,

For Interest income (1099-INT), if you don't work (no W-2) and you are earning certificate of deposit (CD) income from your life saving money, what % of tax is imposed? Let's say interest income is the only source of income.

My knowledge is if there is W-2 (working income) the interest income follows your W-2 tax rate but 1) what if interest income is the only source of income then what is the tax rate?

2) Is there certain threshold on interest income tax rate? For an example if there is threshold of 20% tax rate on first $20,000 interest income then anything beyond is taxed at different rate if my entire interest income was $50,000?

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Best answer by DoninGA

Taxable interest income is treated just like any other taxable income. You will have total income reported on your Form 1040 Line 9. An adjustments to income on Line 10. Your Adjusted Gross Income on Line 11. And your Standard Deduction for your filing state on Line 12.

You are taxed on your taxable income on Line 15.

DawnC

Employee

Wages from a W-2 and interest income are both considered ordinary income. You can see your tax rates below; it depends on your total taxable income (wages + interest) and your filing status.

Select your filing status below to see what tax bracket you're in and the formula for your 2023 federal income taxes. These formulas apply to taxable (not gross) income and don't factor in tax credits, such as the Earned Income Tax Credit or the Child Tax Credit. You will see a chart that I believe answers your question, if not, please reply.