How much income tax do I have to pay on interest?

Answer by  bizgrad02 (103)

This depends on what you make at the end of the year. There is a section on your tax form to include interest. If you received interest from an interest bearing banking account, you will receive a 1099 form. This gets added into your other income. After you deduct your deductions, use the tax book to look up your tax.

Answer by  rjn613 (100)

The tax you pay on interest depends on your total income. The United States has a progressive income tax system, meaning that the percentage of income paid in tax goes up as total income goes up. For most people, interest is additional income on top of salary and is thus taxed at your highest marginal rate.

Answer by  johnhattan (33)

Depending on how much interest you make, you may be liable for capital gains tax. If the amount of interest is trivial, say from a personal savings account or paypal moneymarket savings, then you likely won't be liable for anything. If your interest income is significant, you will be liable for capital gains tax. Get thee to an accountant.

Answer by  Wallybingus (176)

That depends on the type of interest plus your tax bracket. If the interest is from retirement investments, you may not have to pay tax at all, until the money is withdrawn at retirement. If it's normal bank interest (like a savings account), it will be considered income, upon which you will pay tax at your regular tax rate.

Answer by  mlucas (515)

You pay your regular income tax rate on interest earned that is not exempt from taxation. SO it would depend on your marginal rate. You may pay no tax on it or as much as 36.9%.

Answer by  daltonbob (52)

You must pay income tax on interest according to your tax bracket. If the interest you earn raises you to a higher tax bracket, you would pay the higher bracket percentage.

Answer by  game77 (10)

The income tax rate paid on interest is dependent on your income level and your filing status. Use the IRS tax tables for a quick determination.