The Internal Revenue Service (IRS) of the USA has the authority to decide, for what kind of interest you have to pay taxes. If you have a checking account and are wondering do you have to pay taxes then the answer is “Yes”. According to the IRS, you have to pay taxes for interest which is earned from interest-bearing checking accounts, saving accounts, money market accounts, etc.
Key Takeaways
- A checking account is a type of deposit account offered by a bank or other financial institutes
- A checking account is also known as a demand account or transactional account
- A commercial checking account can only be used by businesses and it is also the property of the business
- If you are planning to open a checking account then you have to consider quite a few things like fees, minimum balance requirement, ATM access, etc.
- For checking account, some incomes are taxable like certificate of deposit, corporate bonds, treasury bills, etc.
Definition Of Checking Account
A checking account is a deposit account and it includes commercial or business accounts, student accounts, and joint accounts, as well as other accounts that offer similar facilities. If you have a business then you can have a commercial checking account and it can only be used by businesses and it is also the property of the business. There are many banks that offer special checking accounts for college students that will remain free of charge until they graduate. For marital partners, a joint checking account is the best option. In a joint account, both the account holder can write checks on the account.
List Of Best Checking Accounts In The USA
1. Heritage Bank eCentive checking account, 1.02% APY
2. Navy Federal Credit Union Flagship Checking, up to 0.45%
3. nbkc bank Everything Account, 0.25% APY
4. Ally Interest Checking account, 0.10% to 0.25% APY
5. Radius Bank Rewards Checking, 0.10% to 0.15% APY
6. TIAA Bank Yield Pledge Checking, 0.10% APY
7. Capital One 360 Checking, 0.10% APY
8. Chase Total Checking and Chase College Checking 0.01% APY
9. Chase Premier Plus & Sapphire Checking
10. Discover Cashback Debit, non-interest-bearing checking account
Things To Consider When Opening A Checking Account
People open checking accounts for convenient access to their money because a checking account makes paying bills a breeze. However, many banks charge various fees for checking accounts. So, before you open a checking account you should consider these:
1. No or low fees
2. No minimum balance requirement
3. Free access to ATMs
4. Online and mobile access
What Types Of Interest Income Is Taxable?
Below are the types of interest income that are taxable. So you have to pay taxes if the interest is earned on –
1. Bank accounts – checking account, saving account
2. Money market accounts
3. Share accounts with credit unions
4. Certificates of deposit
5. Corporate bonds
6. Deposited insurance dividends
7. Treasury bills, notes, and bonds
8. Savings bonds
9. Any interest paid to you by a business that’s $600 or more
If you have any of the above accounts then you’ll have to account for any interest earned on your taxes. However, there are some types of interest income that you can exclude from your taxes. They are:
1. Interest redeemed from Series EE and Series I bonds issued after 1989 if you’re using the money to pay for qualified higher education expenses
2. Interest on certain municipal bonds
3. Interest on insurance dividends left on deposit with the U.S. Department of Veterans Affairs
FAQs About Checking Account
1. Why People Use Checking Accounts?
2. Is It Safe To Open A Bank Account Online?
3. Can Checking Accounts Earn Interest?
4. How Is Interest Taxed On A Checking Account?
5. How Many Checking Accounts Can I Have?
References: 1 https://www.depositaccounts.com/blog/do-i-have-to-pay-taxes-on-deposit-account-earnings.html
References: 2 https://www.fool.com/knowledge-center/how-much-taxes-do-you-have-to-pay-on-money-in-a-sa.aspx