1099-INT box guide
1099-INT Box 8: Tax-exempt interest
Report federally tax-exempt interest without including it in ordinary federal taxable interest.
Return destination
Where the amount goes
Form 1040 tax-exempt interest
1099-INT
Return to the complete form guide and reconciliation worksheet.
Checks before filing
- Report the amount even when it is federally tax-exempt.
- Check whether the bond is exempt in your state of residence.
- Keep private activity bond interest from Box 9 identified separately.
How Box 8 works
Box 8 reports tax-exempt interest paid to you during the year, generally interest on bonds issued by state, local, territorial, or tribal governments — the municipal bond category — including accrued interest on a bond sold between interest payment dates. This interest is generally excluded from federal taxable income, but the instructions still require it to be reported; it isn't simply left off the return the way some genuinely non-reportable items are.
Because it's excluded from taxable income but still reportable, tax-exempt interest goes on its own line on Form 1040 rather than into the taxable-interest total that Box 1 and Box 3 feed — a composite broker statement typically shows a Box 8 total clearly separated from the taxable-interest summary. Federal tax-exempt treatment doesn't automatically extend to state income tax: many states only exempt interest on bonds issued within that state, so a fund or portfolio holding municipal bonds from multiple states can produce a mix of state-taxable and state-exempt amounts, usually sorted out with the payer's supplemental state-by-state breakdown rather than a single Box 8 figure.
Tax-exempt doesn't mean invisible to every calculation on the return. Box 8 amounts are added into the combined-income figure used on the worksheet for determining how much of a taxpayer's Social Security benefits is taxable, so a large Box 8 balance can indirectly increase the taxable portion of benefits even though the interest itself is never taxed. Box 8 also already includes, rather than excludes, any specified private activity bond interest broken out separately in Box 9 — the two aren't added together, and treating Box 9 as additional income on top of Box 8 overstates tax-exempt interest.
Worked example
A retired taxpayer holds a municipal bond fund reporting Box 8 of $1,400 in tax-exempt interest and receives $18,000 in Social Security benefits for the year. The $1,400 is never included in the taxpayer's federal taxable income, but it is added into the combined-income figure on the Social Security benefits worksheet alongside other income, which can push more of the $18,000 in benefits into the taxable category than if the municipal bond interest didn't exist.
Related 1099-INT boxes
Box 1: Interest income
Understand taxable bank and investment interest and where it enters the federal return.
Box 2: Early withdrawal penalty
Trace an early withdrawal penalty from Form 1099-INT to the eligible Schedule 1 adjustment.
Box 3: U.S. savings bond and Treasury interest
Separate federally taxable Treasury interest that may receive different state income-tax treatment.
Box 4: Federal income tax withheld
Reconcile backup withholding from interest with the federal withholding claimed on Form 1040.
Frequently asked questions
What does Box 8 mean on 1099-INT?
Box 8 reports tax-exempt interest. It is generally excluded from federal taxable income but remains reportable and can affect other tax calculations.
If Box 8 interest is tax-exempt, do I even need to report it?
Yes. Tax-exempt interest is generally excluded from federal taxable income, but the instructions still require you to report the amount on your return — it isn't simply omitted.
Can tax-exempt interest actually affect how much tax I owe if it's never taxed itself?
Yes, indirectly. Tax-exempt interest is added into the combined-income calculation used on the worksheet for figuring how much of your Social Security benefits is taxable, so it can increase the taxable portion of benefits even though the interest itself stays untaxed.
Is my Box 8 amount also exempt from state income tax?
Not necessarily. Many states only exempt interest on municipal bonds issued within that state, so a fund holding bonds from multiple states can produce a mix of state-taxable and state-exempt amounts — check the payer's supplemental state breakdown.