How is interest taxed on savings accounts? | finder.com
Interest taxed on savings account

How is interest taxed on savings accounts?

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

Just like any other source of income, interest you earn from a savings account is subject to tax.

When you file your income tax return at the end of each financial year, you’ll need to declare all of your sources of income including your salary and income earned from investments. This includes declaring any interest you’ve earned from deposits in savings accounts.

But at what rate is the interest taxed and how can you get the best possible investment returns from a savings account? Read on to find out.

Back to top

How do I find the best savings accounts for my tax needs?

  • Check interest rates. The rate of interest will obviously play a huge role in determining how quickly you can grow your savings balance. Compare interest rates between accounts to see which ones offer the best deal.
  • Watch out for traps. Keep an eye out for some common traps attached to savings accounts. For example, an account may only offer the high interest rate advertised for a limited introductory period, while you may need to satisfy certain criteria (for example deposit a certain amount each month) in order to achieve the maximum rate of interest.
  • Look at all the account features. The interest rate isn’t the only factor that affects whether or not a savings account is right for you. Check for hidden fees and charges, whether you are able to access your funds at any time, and how you can manage your account before deciding on the right account.
  • Consider inflation. When considering the returns provided by a savings account, remember to take into account inflation as well as the tax you need to pay on interest. Factoring in the effects of inflation increases the overall effective tax rate on your savings balance, so it’s important to shop around for an account with a high rate of interest.
  • Compare your options. With so many institutions and products available, it’s important to compare your options to find one that suits your financial needs. Start comparing a range of accounts today, or see our lists of the best savings accounts by specific features.
  • Ask your accountant for help. For any advice on savings account interest and how it will affect your income tax return, ask your accountant or financial adviser for expert assistance.

Compare some of the best savings accounts

Name Product Fee Minimum deposit Minimum balance to earn interest APY
CIT Bank Savings Builder High Yield Savings Account
CIT Bank Savings Builder High Yield Savings Account
$0
$100
2.15%
A super-high interest rate if you're in the habit of saving at least $100 per month or have $25K in the bank.
$0
$1
$0
2.01%
Get one of the highest interest rates available without high balance requirements or fees.
$0
$0
$0
1.9%
Earn one of the highest interest rates without the fees.
$0
$0
$0
1.85%
The most common services and transactions are free with Ally Bank.
$15 per quarter
(can be waived)
$25
1.8%
Earn one of the highest interest rates if you have at least $10,000 in savings.
$0
$100
$0
1.55%
Earn a high interest rate with no monthly fees.

Compare up to 4 providers

Adrienne Fuller

Adrienne Fuller leads the publishing team at finder.com. She has one goal: to deliver the accurate and transparent information she wishes she had when she made some of life's important financial decisions. When she's not helping folks save money, she's hiking with her two Catahoulas around her home in San Diego.

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy and Cookies Policy and Terms of Use.
Go to site