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Why is my interest income subject to taxes?

Generally, if you earn interest income on an account and you can use or withdraw it at any time without paying a penalty, then it is taxable income in the year it becomes available to you and therefore, it should be included as income on your tax return for that year.

If the total amount of taxable interest income you received is more than $1,500 during the tax year, you must complete Form 1040 Schedule B.

For examples from the IRS of taxable interest and nontaxable or excludable interest, see here.

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