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1 1 (June 24, 2022)

handle is hein.crs/govehww0001 and id is 1 raw text is: Congressional ____ ~ Research Service The Tax Treatment and Distribution of Taxable Interest Income June 24, 2022 For tax purposes, interest is the amount paid for the use of borrowed money. Interest received by individuals is generally included in taxable income, unless the interest is received for assets held in a tax- deferred or tax-exempt account (e.g., retirement account or education savings account) or a specific exclusion applies (e.g., qualifying state or local government bond interest). Legislation in the 117th Congress, the Middle-Class Savings and Investment Act (S. 4393), proposes excluding up to $300 of interest income per taxpayer ($600 in the case of married taxpayers filing a joint return). This Insight analyzes data on interest income reported on individual 2019 tax returns from the Internal Revenue Service's (IRS's) Statistics of Income (SOI) files, and highlights potential economic and policy considerations. Taxable Interest: Individual Income Tax Return Data Taxpayers reported $153.3 billion in taxable interest on 2019 individual income tax returns, which was about 1% of reported total income. Note that this figure reflects only interest reported on individual income tax returns, and does not include interest on assets held in tax-preferred accounts (as noted above) or interest earned by non-filers, including individuals with incomes below the filing threshold (e.g., low- income retirees). Additionally, ordinary (nonqualified) dividends may be in the nature of interest, but not included in this total. Interest income tends to be reported on returns filed by taxpayers with higher income, older taxpayers, and married taxpayers. Income: 8% of taxable interest income was reported by taxpayers with adjusted gross income (AGI) below $50,000, who represented about half (56%) of all taxpayers in 2019 and reported 17% of total income. In contrast, taxpayers with AGI of $5 million or more, who represented 0.1% of all taxpayers and reported 7% of total income, reported 23% of taxable interest income in 2019. Age: The majority (51%) of taxable interest included on 2019 tax returns was reported by taxpayers age 65 and over; 20% of total income was reported by taxpayers in this age group, indicating taxable interest income is more concentrated among older taxpayers than income generally. Congressional Research Service https://crsreports.congress.gov IN11958 CRS INSIGHT Prepared for Members and Committees of Congress

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