IRS Form 1040 Schedule B: Interest and ordinary dividends explained (2026)
IRS Form 1040 Schedule B reports taxable interest and ordinary dividends earned during the tax year. You generally must file it if either category exceeded $1,500 in 2025, or if at any point during the year you held a financial interest in – or signature authority over – a financial account located outside the United States. The foreign account question applies regardless of income.
Key facts
Schedule B (Form 1040) is required in several situations – the $1,500 threshold applies to income, not to foreign account ownership.
| Situation | Schedule B required? |
|---|---|
| Taxable interest > $1,500 | Yes – Part I + full form |
| Ordinary dividends > $1,500 | Yes – Part II + full form |
| Foreign financial account (any balance or income) | Yes – complete Part III; complete Part I and/or Part II too if those apply |
| Interest/dividends < $1,500, no foreign account | No, unless another Schedule B trigger applies |
Other things to keep in mind:
- FBAR trigger: aggregate foreign account balances exceeded $10,000 at any point during 2025
- FBAR deadline: April 15, 2026, with an automatic extension to October 15, 2026
- Key documents needed: Form 1099-INT, Form 1099-DIV, Form 1099-OID
- Qualified dividends are reported on Form 1040, Line 3a – not on Schedule B – and taxed at the same 0%, 15%, or 20% rates as net capital gain; exact thresholds depend on taxable income and filing status
- The current Schedule B (Form 1040) and its instructions are available as fillable PDFs from the IRS
What exactly is Form 1040 Schedule B?
Schedule B is the IRS attachment to Form 1040 that itemizes taxable interest, ordinary dividends, and your foreign account and trust disclosures for the tax year.
Definition and core objectives
Schedule B (Form 1040) is an IRS attachment that provides a line-by-line breakdown of taxable interest income and ordinary dividends received during the tax year. The IRS uses Schedule B to cross-reference amounts you report on Form 1040, Line 2b (taxable interest) and Line 3b (ordinary dividends).
The form is split into three parts: Part I (interest), Part II (ordinary dividends), and Part III (foreign accounts and trusts). Each part feeds specific lines on your Form 1040.
Who is obligated to file it?
Schedule B is required in several situations, most commonly:
- Taxable interest income exceeded $1,500 during the tax year.
- Ordinary dividend income exceeded $1,500 during the tax year.
- You held a financial interest in, or had signature authority over, a foreign financial account at any point during the year – regardless of account balance or income amount.
Less common triggers include seller-financed mortgage interest, accrued bond interest, OID or bond-premium adjustments, the savings bond interest exclusion, nominee interest or dividends, and foreign trust reporting.
NOTE! The foreign account trigger applies even if the account earned no income. A foreign checking account with a $200 balance and zero interest still requires you to complete Schedule B Part III.
Types of income that go on the 1040 Schedule B
Schedule B captures two main income categories: taxable interest (Part I) and ordinary dividends (Part II). Both are reported separately by payer, with the totals carrying to specific lines on Form 1040.
Taxable interest income: More than just savings accounts
Many people are aware that interest from savings accounts is taxable, but there are other forms of interest income that also need to be reported.
These include:
- Interest from Certificates of Deposit (CDs)
- Interest from corporate bonds
- Interest from Treasury notes and bonds
- Money market account interest
Interest income from each payer is listed separately on Schedule B, Part I, Line 1 – including the payer's name and the exact amount. The Part I total carries to Form 1040, Line 2b.
Taxable ordinary dividends: Beyond stock payments
Ordinary dividends are the most common type of corporate distribution and are generally paid out of a corporation's earnings and profits. Schedule B Part II, Line 5 includes dividends from mutual funds, REITs, and money market funds; bank money market accounts usually belong on Part I as interest.
Ordinary dividends can also include:
- Dividends from mutual funds
- Dividends from real estate investment trusts (REITs)
- Certain distributions from money market funds
If your ordinary dividend income exceeds the $1,500 threshold (2025), it must be reported on Schedule B.
Qualified dividends on Schedule B are a frequent point of confusion: they are not reported there. Instead, they are entered on Form 1040, Line 3a – a subset of ordinary dividends paid by domestic corporations and certain qualifying foreign corporations – and taxed at the same 0%, 15%, or 20% rates as net capital gains; exact thresholds depend on taxable income and filing status.
Additional reporting scenarios
Beyond the $1,500 income threshold, Schedule B has two other triggers worth knowing: foreign account and trust disclosures, and a handful of less common filing situations that apply regardless of income level.
Foreign accounts and trusts: a closer look
Schedule B isn't just about domestic income; it also has a section dedicated to foreign financial interests. If you have foreign bank accounts or receive distributions from foreign trusts, you are obligated to disclose this information on Part III. Disclosure obligations apply even when no income was received and the account balance is small.
Special cases: when the norm doesn't apply
While the $1,500 threshold is the most common trigger for filing Schedule B, there are other scenarios that necessitate its use:
- Seller-financed mortgage interest
- Accrued bond interest not reported on Form 1099-INT
- Financial interest in, or signature authority over, a foreign financial account
For a deeper look at the FBAR reporting obligation that often runs alongside Schedule B Part III, see our FBAR filing guide for US expats.
How to complete 1040 Schedule B (step-by-step)
Schedule B consists of three parts. Part I covers interest income, Part II covers ordinary dividends, and Part III covers foreign financial accounts and trusts. Each part feeds specific lines on Form 1040.
Part I – Interest income (Lines 1–4)
- Line 1: List each interest payer's name and amount separately. Source documents: Form 1099-INT and Form 1099-OID. Includes interest from banks, CDs, Treasury bonds, and corporate bonds.
- Line 2: Nominee interest – interest paid to you that legally belongs to another person – is subtracted here. Show a subtotal of all amounts on Line 1, write "Nominee Distribution" below it, and subtract the nominee amount. You must also issue a Form 1099-INT to the actual owner.
- Line 3: Excludable interest on Series EE or I US savings bonds used for qualified higher education expenses (Form 8815 required).
- Line 4: Total taxable interest – carries to Form 1040, Line 2b.
Part II – Ordinary dividends (Lines 5–6)
- Line 5: List each dividend payer's name and total ordinary dividend amount. Source document: Form 1099-DIV, Box 1a. Includes dividends from mutual funds, REITs, and money market funds.
- Line 6: Total ordinary dividends – carries to Form 1040, Line 3b.
- Qualified dividends (Form 1099-DIV, Box 1b) are not entered on Schedule B. They go directly to Form 1040, Line 3a, and are taxed at the same 0%, 15%, or 20% rates as net capital gains; exact thresholds depend on taxable income and filing status.
Part III – Foreign accounts and trusts (Lines 7–8)
- Line 7a, Question 1: Answer "Yes" if you had a financial interest in, or signature authority over, a financial account in a foreign country at any point during 2025 – even if the account earned no income. Check "Yes" even if you aren't required to file FBAR.
- Line 7a, Question 2: Answer "Yes" if you are required to file FinCEN Form 114 (FBAR). This applies if the aggregate value of your foreign financial accounts exceeded $10,000 at any point during the year.
- Line 7b: If you answered "Yes" to Question 2, enter the country (or countries) where the account is located.
- Line 8: Answer "Yes" if you received a distribution from, or were a grantor of, or transferor to, a foreign trust. A "Yes" answer typically triggers Form 3520 or Form 3520-A filing.
A "Yes" answer to Question 2 on Line 7a requires filing FinCEN Form 114 (FBAR) electronically through the Treasury's BSA E-Filing System – the FBAR is not attached to your tax return. The FBAR deadline is April 15, 2026, with an automatic extension to October 15, 2026.
For the complete FBAR filing walkthrough, see our FBAR filing guide for US expats.
Schedule B and foreign accounts – what US expats must know
US citizens and permanent residents abroad must complete Schedule B Part III if they have a foreign financial account or foreign trust disclosure to report, even when interest or dividend income is under $1,500. A foreign financial account – not income level – is the Part III trigger, and signature authority counts too.
Five points to keep in mind:
- Part III, Line 7a triggers FBAR (FinCEN Form 114) when aggregate foreign account balances exceed $10,000 at any point during 2025.
- FBAR is filed electronically through FinCEN's BSA E-Filing System, separately from your tax return – it is not submitted to the IRS.
- Part III reminds you to check FATCA obligations separately. If you meet the presence-abroad test and no exception applies, Form 8938 is generally required if your specified foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any time (single/MFS), or $400,000 on the last day or $600,000 at any time (MFJ).
- Non-willful FBAR penalty: up to $16,536 per FBAR form not filed (2025 inflation-adjusted amount), assessed per report following the 2023 Supreme Court ruling in Bittner v. United States – not per account.
- Willful FBAR penalties can be up to $165,353 or 50% of the balance in the account at the time of the violation, whichever is greater, for penalties assessed on or after January 17, 2025.
TFX client scenario: A US citizen residing in Germany held a Deutsche Bank checking account with a peak balance of €45,000 (roughly $49,000) in 2025 and earned €200 in interest. Schedule B Part III, Line 7a required "Yes" to both questions; FBAR filing was required (balance exceeded $10,000), but Schedule B Part I was not required – interest income was below the $1,500 threshold.
For more on the related FATCA filing, see our Form 8938 (FATCA) filing thresholds and requirements and FBAR penalties guide.
Where to get Form 1040 Schedule B
Schedule B is published by the IRS and available at no cost. You can download the current fillable PDF directly from the IRS website.
Common mistakes when filing Schedule B
Common Schedule B mistakes include omitted payers, incorrect qualified dividend treatment, Part III non-disclosure, and nominee interest misreporting.
1. Omitting a payer from Line 1
If you file Schedule B, list each payer separately on Line 1. Payers that report at least $10 of interest generally issue Form 1099-INT, and IRS matching can lead to a CP2000 notice if amounts do not line up.
2. Including qualified dividends in the Schedule B Part II total
Qualified dividends (Form 1099-DIV, Box 1b) belong on Form 1040, Line 3a – not on Schedule B. Including them in the Line 5 total inflates ordinary dividend income and results in overpayment at ordinary rates instead of the preferential 0%/15%/20% rates.
3. Answering "No" on Line 7a when a foreign account exists
US expats with any foreign financial account must answer "Yes" on Part III Line 7a, Question 1, regardless of account balance or whether the account earned income. An incorrect "No" may constitute a failure to disclose.
TFX client scenario: A US expat in the Netherlands answered "No" on Part III Line 7a, believing a €3,000 savings account was below the FBAR threshold. The account was not subject to FBAR (balance below $10,000), but the "No" answer on Line 7a was still incorrect – the question asks about financial interest, not FBAR obligation. The error required an amended return.
4. Failing to subtract nominee interest on Line 2
If a Form 1099-INT was issued in your name but the interest belongs to another person (for example, a joint account where only one person is taxed on the income), the nominee amount must be subtracted on Line 2 – and a separate Form 1099-INT must be issued to the actual owner. Omitting this step results in double-reported income.
Bottom line: Why Schedule B matters
Schedule B (Form 1040) – key points for tax year 2025 (filed in 2026):
- File Schedule B if your taxable interest or dividends exceeded $1,500 during tax year 2025
- Complete Schedule B Part III if you held any foreign financial account at any point during 2025 – even with zero income or a balance below $10,000
- A "Yes" on Part III Line 7a, Question 2 means you likely need to file FBAR (FinCEN Form 114) by October 15, 2026, if total foreign balances exceeded $10,000 at any point during the year
- Qualified dividends go on Form 1040, Line 3a – not on Schedule B
- Each payer must be listed separately on Lines 1 and 5
Understanding Schedule B is essential for accurate and compliant tax reporting. By familiarizing yourself with its various components, you can file confidently and avoid the most common IRS notices.
US expats face one extra layer: Part III's foreign account question applies regardless of how much you earned. If you hold any account outside the US – even a small checking account – Schedule B is part of your return.
For deadline specifics applicable to expats, see our US expat tax filing deadlines guide.
FAQ
The Schedule B tax form is an IRS attachment to Form 1040 that reports taxable interest income and ordinary dividends. US taxpayers attach Schedule B to their tax return when taxable interest or ordinary dividends exceed $1,500, when they have a financial interest in – or signature authority over – a foreign financial account, or in certain less common cases.
Schedule B is required most commonly when: taxable interest income exceeded $1,500 in the tax year; ordinary dividend income exceeded $1,500; or the taxpayer held a financial interest in, or had signature authority over, a foreign financial account – in which case Part III must be completed regardless of income amount. Other less common triggers also apply.
Part III of Schedule B covers foreign financial accounts and trusts. Line 7a asks two questions: whether the taxpayer held a financial interest in, or had signature authority over, a foreign account during the year, and whether the taxpayer is required to file FinCEN Form 114 (FBAR). A "Yes" to the second question means FBAR filing is required because aggregate foreign account balances exceeded $10,000 at any point during the year. Schedule B Part 3 (printed as Part III on the form) is separate from Schedule B Line 1, which reports taxable interest by payer in Part I.
US expats who hold any foreign bank account must complete Schedule B Part III regardless of whether interest or dividend income exceeded $1,500. The Line 7a foreign account question applies to all US citizens and permanent residents with overseas financial accounts, including checking, savings, securities, brokerage, and similar accounts.
Ordinary dividends are reported on Schedule B Part II, Line 5, and taxed at ordinary income rates (up to 37% in 2025). Qualified dividends – a subset from domestic corporations and qualifying foreign corporations – are taxed at the same 0%, 15%, or 20% rates as net capital gain; exact thresholds depend on taxable income and filing status. Qualified dividends are entered on Form 1040, Line 3a – not on Schedule B.
Completing Schedule B requires three primary documents: Form 1099-INT, which reports interest income from each payer; Form 1099-DIV, which reports dividend income from each payer (Box 1a for ordinary, Box 1b for qualified); and Form 1099-OID, which reports original issue discount income, if applicable. For foreign accounts, records of account balances throughout the year are also required to determine FBAR filing obligation.
Inaccurate reporting can trigger a 20% accuracy-related penalty on any underpayment attributable to negligence or other covered conduct under IRC Section 6662. For Part III non-disclosure of a foreign account, non-willful FBAR violations carry penalties up to $16,536 per form (2025 inflation-adjusted, assessed per report following Bittner v. United States, 2023); willful violations can reach $165,353, or 50% of the account balance at the time of the violation, whichever is greater, for penalties assessed on or after January 17, 2025, under 31 U.S.C. § 5321(a)(5)(C).
Interest income on Form 1040 flows from Schedule B Part I. Schedule B Part I total (Line 4) carries to Form 1040, Line 2b (taxable interest). Schedule B Part II total (Line 6) carries to Form 1040, Line 3b (ordinary dividends). Part III produces no dollar amount – it triggers foreign account disclosure and FBAR obligations only.
