Report your interest, dividends, and foreign accounts
Most people don’t need to fill out Schedule B, but it may still be helpful
Schedule B is necessary if you had more than $1,500 of interest from bank accounts and ordinary investment dividends in 2020
Fill out Schedule B if you’re reporting an amount of interest that’s different from the total amount you earned for the year
You may need to file Schedule B if you own, or receive money from, a foreign financial account
Form 1040 Schedule B, simply referred to as Schedule B, is a tax form that allows you to detail your interest and dividend income from the year. It also allows you to identify whether or not you had income from, or ownership of, certain foreign accounts.
Most people don’t need to use Schedule B. You generally only need to file Schedule B — meaning fill it out and attach it to your federal income tax return — if you had taxable interest or ordinary dividends worth more than $1,500 in 2020.
Your taxable interest is usually listed on Form 1099-INT, and it includes what you get from a savings or checking account, certificates of deposit (CDs), and bonds. Ordinary dividends are usually listed in box 5b of Form 1099-DIV and include most dividends you get from stock investments.
Schedule B is easy to fill out, and there’s really no harm in completing it if you aren’t sure whether or not you need it. It can also help you to complete the rest of your tax return. (Read more on how to fill out Form 1040.)
Most people do not need to complete Schedule B. There are eight situations where you may need to attach Schedule B to your Form 1040 and if you’re unsure, you may just want to fill it out. The IRS instructions for Schedule B also have more on exceptions to the scenarios below.
You earned more than $1,500 of taxable interest or ordinary dividends. Taxable interest includes what most people get from their savings accounts. Ordinary dividends are what most people get from investments in brokerage accounts. Dividends you earn in retirement accounts are not included because you don’t pay tax on them while they're in your account.
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You received interest from a seller-financed mortgage. These are mortgages where you personally extend a mortgage loan to a home buyer, like with a wraparound mortgage. The key exception here is you only need to include the interest if the buyer used the property as their residence.
You have accrued interest from a bond. This only covers accrued interest, which is interest that a bond has earned but that has not been collected yet. You may have accrued interest if you bought a bond between interest payment dates, and you paid the accrued interest to the seller.
You are reporting an amount of original issue discount (OID) that is less than the amount shown on your Form 1099-OID. OID is a type of interest that’s most common when someone buys a bond for less than its face value (its original issue price). The difference between the face value and purchase value of a bond is its OID.
You have an amortizable bond premium and you’re using the amount of it to decrease your annual income from bond interest. A bond premium occurs when a bond is sold for more than its face value. The amortizable bond premium, or ABP, is the value you paid above the bond’s face value.
You have U.S. savings bonds from series I or EE that were issued after 1989 and you’re planning to exclude the interest from your income. You can deduct this interest, using Form 8815, if you meet four criteria:
In 2020, you cashed a series I or EE bond that was issued after 1989.
You paid qualified higher education expenses in 2020 for yourself, your spouse, or a dependent.
Your filing status is not married filing separately.
Your 2020 modified adjusted gross income (MAGI) was less than $97,350 if you file as single, head of household, or qualifying widow(er) and less than $153,550 if you are married filing jointly.
You are reporting interest or ordinary dividends that you received as a nominee. You are a nominee if you received interest on behalf of someone else, such as a spouse or dependent.
You have a foreign financial account or trust that you either received a distribution from, were the grantor of, were transferor to (transferred money into it), had a financial interest in, or had signature authority over. Read more on how trusts work.
Form 1040 Schedule B has just eight lines, divided over three sections. If any line or section doesn’t apply to you, you can either leave it blank or write in a 0. (For more on how to file your taxes, try our complete guide to filing income taxes in 2021.)
This section has you add up all your sources of interest. If your interest income is less than $1,500 then you don’t actually need to attach Schedule B to your tax return, unless another part of the form applies to you. If you have more than $1,500 of interest, make sure to also complete Part III.
Line 1, which is a large section of the form, is where you name all your sources of interest and how much interest you made from each source. Write each source on its own line. The only interest you shouldn’t report here is tax-exempt interest, which is primarily from state and municipal bonds.
Make sure to list all the interest that was reported on your Forms 1099-INT or 1099-OID. List interest you earned as a nominee. You’re a nominee if you received an interest payment but the interest is actually owned by someone else. Also include interest from any mortgages you financed for someone else (if the person used the home as their residence). Interest from U.S. savings bonds that are series EE, H, HH, and I, should go here even if you plan to later exclude that interest from your income.
Add up all your individual interest sources and write the sum on line 2.
On line 3, write the amount of interest from U.S. savings bonds that you are excluding from your income. If you do have interest to exclude, you will also need to complete Form 8815.
Subtract line 3 (total interest) from line 2 (excludable interest) and write the answer on line 4. The value on line 4 of Schedule B also goes on line 2b of your Form 1040 or 1040-SR.
Learn more about the types of savings accounts you can earn interest from.
This section asks you to add up all your sources of ordinary dividends. As with interest income, if your dividend income is less than $1,500, you don’t need to use Schedule B unless you need to complete another part of the form. You must also complete Part III if you have more than $1,500 of ordinary dividends.
Line 5 is where you write all your sources of ordinary dividends, and how much you made from each source. For most people, you can find these amounts in box 1a of a Form 1099-DIV.
Add up all dividend amounts and write the sum on line 6. This value also goes on line 3b of your Form 1040 or 1040-SR.
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This part is only three questions that you answer by checking a box, yes or no. Complete this part if you had more than $1,500 of interest or ordinary dividends from earlier in Schedule B. Also complete this section if you had financial interest in a foreign account or trust at any point during the 2020 tax year.
Line 7a is a box that you need to put a checkmark in if you, at any time during 2020, had a financial interest in, or signature authority over, a financial account that’s located in a foreign country. This can include a bank account, brokerage account, or other investment account. If the answer is no, move to line 8. If you check yes here, you also need to complete and attach Form 114, Report of Foreign Bank and Financial Accounts, also called FBAR, from the federal Financial Crimes Enforcement Network (FinCEN).
Check yes on line 8 if you received a distribution from a foreign trust, if you were the grantor of a foreign trust, or if you were the transferor of a foreign trust (meaning you transferred money into it). If you check yes, you likely need to complete Form 3520. (Don’t attach Form 3520 to your tax return, though. Mail it to the address in the form’s instructions.)
Derek is a personal finance editor at Policygenius in New York City, and an expert in taxes. He has been writing about estate planning, investing, and other personal finance topics since 2017. His work has been covered by Yahoo Finance, MSN, Business Insider, and CNBC.
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