Schedule B (Form 1040) lists your taxable interest and ordinary dividends, payer by payer, and asks whether you have foreign accounts or trusts. You need it if you had over $1,500 of taxable interest or ordinary dividends in the year, as of October 2026, or if any of a handful of special situations apply, including having a financial account in another country.
Plenty of people file without it because their bank interest stays under the threshold. The catch is Part III: the foreign account questions can make Schedule B compulsory even when your interest is tiny. Everything below comes from the IRS 2025 instructions and form.
Who has to file Schedule B
The IRS says to use it if any of these applies:
- You had over $1,500 of taxable interest or ordinary dividends.
- You received interest from a seller-financed mortgage and the buyer used the property as a personal home.
- You have accrued interest from a bond, or you're reporting less OID or interest than a Form 1099 shows (for example because of amortizable bond premium).
- You're excluding interest from series EE or I U.S. savings bonds issued after 1989.
- You received interest or dividends as a nominee (in your name, but belonging to someone else).
- You had a financial interest in, or signature authority over, a financial account in a foreign country, or you received a distribution from, were a grantor of, or a transferor to a foreign trust.
The three parts
| Part | What goes there | Where the figures usually come from |
|---|---|---|
| Part I, Interest | Every payer of taxable interest and the amount, including savings bond interest | Forms 1099-INT and 1099-OID |
| Part II, Ordinary dividends | Every payer of ordinary dividends and the amount | Form 1099-DIV |
| Part III, Foreign accounts and trusts | Yes or no questions on foreign accounts, FBAR filing and foreign trusts | Your own records |
You can list more than one payer in each entry space, as long as each amount sits next to its payer's name. Tax-exempt interest, such as from municipal bonds, doesn't go on line 1; it goes on line 2a of Form 1040. If you're not sure what your forms show, our guides to Form 1099-INT and Form 1099-DIV walk through the boxes.
Nominee and adjustment entries
If a 1099 includes income that belongs to someone else, or overstates what's taxable, you don't just change the number. You report the full amount, put a subtotal under your last entry, then subtract the adjustment with a label. The instructions name the labels:
- "Nominee Distribution" for income you received for someone else (you then give the owner a Form 1099-INT and file Forms 1096 and 1099-INT, unless the owner is your spouse).
- "Accrued Interest" for interest you paid to a seller when buying a bond between payment dates.
- "OID Adjustment" when you report less OID than Form 1099-OID shows.
- "ABP Adjustment" when you reduce interest by amortizable bond premium.
Seller-financed mortgage interest goes first, with the buyer's name, address and SSN. Leave those out, or fail to give the buyer your SSN, and you may pay a $50 penalty, as of October 2026.
Interest people forget to include
Line 1 isn't just bank interest. The instructions say to include interest from series EE, H, HH and I U.S. savings bonds, any accrued market discount that's taxable, and gains on contingent payment debt treated as interest. Market discount on a tax-exempt bond is taxable, even though the bond's normal interest isn't. If you cashed savings bonds to pay college costs for yourself, your spouse or a dependent, Form 8815 may let you exclude some or all of that interest.
Part II has its own trap for business owners with overseas interests. The IRS tip says you may have to file Form 5471 if you were an officer or director of a foreign corporation, or owned 10% or more of its stock by value or voting power. That's separate from anything on Schedule B itself.
Part III: the foreign account questions
Line 7a asks whether at any time during the year you had a financial interest in or signature authority over a financial account in a foreign country. You check "Yes" even if you don't have to file an FBAR. Accounts include bank, brokerage and savings accounts, cash-value insurance and annuities, and shares in a mutual fund or similar pooled fund.
The second question asks whether you must file FinCEN Form 114. A U.S. person must file it if the combined value of their foreign accounts was over $10,000 at any time in the year. It's filed electronically with FinCEN, not attached to your return, and the penalties are steep: up to $10,000 for a non-willful failure, and for willful failures the greater of $100,000 or 50% of the account balance (figures as of October 2026). Our FBAR guide covers the filing itself.
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Line 8 covers foreign trusts. A distribution includes, for this purpose, a loan of cash or marketable securities, and grantors or transferors may need Form 3520. You may also need Form 8938 for foreign financial assets, whether or not you file an FBAR.
The verdict
If your only income is wages and a little bank interest, you probably don't need Schedule B. The moment you've got over $1,500 of interest or dividends, or any account abroad (even one you can only sign on for work), file it and answer Part III honestly. That one yes or no box carries more risk than the rest of the form put together.
Frequently asked questions
What is the Schedule B threshold?
You need Schedule B if you had over $1,500 of taxable interest or ordinary dividends, or if one of the special situations applies, such as a foreign account.
Do I check yes on Schedule B for a foreign account if I don't file an FBAR?
Yes. The IRS says to check the yes box on line 7a even if you aren't required to file FinCEN Form 114.
Does tax-exempt interest go on Schedule B?
No. Tax-exempt interest goes on line 2a of Form 1040 or 1040-SR, not on Schedule B line 1.
Do I attach the FBAR to my tax return?
No. FinCEN Form 114 is filed electronically with FinCEN and isn't attached to your return.
Is savings bond interest reported on Schedule B?
Yes. Interest from series EE, H, HH and I U.S. savings bonds goes on line 1, unless you qualify to exclude it using Form 8815.
