Investment Income — General Information: Investment Taxes (2025 IRS Guide)

This guide covers “Investment Income — General Information” within investment taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 550 (2025), Investment Income and Expenses, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

• Interest Income,

• Discount on Debt Instruments,

• When To Report Interest Income,

• How To Report Interest Income,

• Dividends and Other Distributions,

• How To Report Dividend Income,

• Stripped Preferred Stock,

• Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs),

• S Corporations, and

• Investment Clubs.

Publication

• 519 U.S. Tax Guide for Aliens

• 525 Taxable and Nontaxable Income

• 537 Installment Sales

• 541 Partnerships

• 542 Corporations

• 555 Community Property

• 559 Survivors, Executors, and Administrators

• 590-B Distributions from Individual Retirement Arrangements (IRAs)

• 925 Passive Activity and At-Risk Rules

• 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs))

• 939 General Rule for Pensions and Annuities

• 970 Tax Benefits for Education

• 1212 Guide to Original Issue Discount (OID) Instruments

Form (and Instructions)

• Schedule A (Form 1040) Itemized Deductions

• Schedule B (Form 1040) Interest and Ordinary Dividends

• Schedule D (Form 1040) Capital Gains and Losses

• Schedule K-1 (Form 1041) Beneficiary's Share of Income, Deductions, Credits, etc.

• Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc.

• Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc.

• Schedule Q (Form 1066) Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation

• SS-4 Application for Employer Identification Number

• W-2 Wage and Tax Statement

• W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)

• W-9 Request for Taxpayer Identification Number and Certification

• 1040 U.S. Individual Income Tax Return

• 1040-SR U.S. Income Tax Return for Seniors

• 1041 U.S. Income Tax Return for Estates and Trusts

• 1065 U.S. Return of Partnership Income

• 1096 Annual Summary and Transmittal of U.S. Information Returns

• 1099-DIV Dividends and Distributions

• 1099-INT Interest Income

• 1099-MISC Miscellaneous Information

• 1099-OID Original Issue Discount

• 1099-PATR Taxable Distributions Received From Cooperatives

• 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

• 1099 General Instructions General Instructions for Certain Information Returns

• 1120 U.S. Corporation Income Tax Return

• 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains

• 3115 Application for Change in Accounting Method

• 6251 Alternative Minimum Tax — Individuals

• 8582 Passive Activity Loss Limitations

• 8615 Tax for Certain Children Who Have Unearned Income

• 8814 Parents' Election To Report Child's Interest and Dividends

• 8815 Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989

• 8818 Optional Form To Record Redemption of Series EE and I U.S. Savings Bonds Issued After 1989

• 8824 Like-Kind Exchanges

• 8832 Entity Classification Election

• 8912 Credit to Holders of Tax Credit Bonds

• 8949 Sales and Other Dispositions of Capital Assets

• 8960 Net Investment Income Tax—Individuals, Estates, and Trusts

• 8997 Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments

See chapter 5, How To Get Tax Help, for information about getting these publications and forms.

Investment Income — General Information

A few items of general interest are covered here.

Recordkeeping.

You should keep a list of the sources and investment income amounts you receive during the year. Also, keep the forms you receive showing your investment income (Form 1099-DIV, Form 1099-INT, Form 1099–OID, etc.) as an important part of your records.

Net investment income tax (NIIT).

The NIIT is a 3.8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status.

See Code section 1411, Form 8960 and the Instructions for Form 8960 for more information.

Tax on unearned income of certain children.

Form 8615 must be filed for any child who meets all of the following conditions.

1. The child has more than $2,700 of unearned income.

2. The child is required to file a tax return.

3. The child either:

   1. Was under age 18 at the end of 2025,

   2. Was age 18 at the end of 2025 and didn’t have earned income that was more than half of the child's support, or

   3. Was a full-time student at least age 19 and under age 24 at the end of 2025 and didn’t have earned income that was more than half of the child's support.

4. At least one of the child's parents was alive at the end of 2025.

5. The child doesn’t file a joint return for 2025.

See Form 8615 and its instructions for details.

However, a parent can choose to include a child's interest and dividends on the parent's return if certain requirements are met. Use Form 8814 for this purpose.

Beneficiary of an estate or trust.

Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust generally is taxable income. You should receive a Schedule K-1 (Form 1041), from the fiduciary. Your copy of Schedule K-1 (Form 1041) and its instructions should tell you where to report the income on your Form 1040 or 1040-SR.

Taxpayer Identification Number (TIN).

You must give your name and TIN (either a social security number (SSN), an employer identification number (EIN), or an individual tax identification number (ITIN)) to any person required by federal tax law to make a return, statement, or other document that relates to you. This includes payers of interest and dividends. If you do not give your TIN to the payer, you may have to pay a penalty. In addition, if you do not provide a certified TIN on Form W-9, the payer must backup withhold on your interest payments at a rate of 24%. Use Form W-9 to provide the necessary information. See Form W-9 and its instructions.

TIN for joint account.

Generally, if the funds in a joint account belong to one person, list that person's name first on the account and give that person's TIN to the payer. (See Joint accounts, later, for information on who owns the funds in a joint account.) If the joint account contains combined funds, give the TIN of the person whose name is listed first on the account.

These rules apply to both a joint ownership by a married couple, and to a joint ownership by other individuals. For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's TIN.

Form W-9 and its instructions provide the following: If this Form W-9 is for a joint account (other than an account maintained by a foreign financial institution (FFI)), list first, and then circle the name of the person or entity whose number you entered in Form W-9, Part I. If you are providing Form W-9 to an FFI to document a joint account, each holder of the account that is a U.S. person must provide a Form W-9. See Form W-9 and its instructions.

Custodian account for your child.

If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's TIN to the payer. For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian.

Penalty for failure to supply TIN.

You may be subject to a penalty if, when required, you fail to:

• Include your TIN on any return, statement, or other document;

• Give your TIN to another person who must include it on any return, statement, or other document; or

• Include the TIN of another person on any return, statement, or other document.

The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year.

This penalty may be abated if you can show that your failure to provide the TIN was due to reasonable cause and not to willful neglect.

If you fail to supply a TIN in the manner required, you also may be subject to backup withholding.

Backup withholding.

Your investment income is generally not subject to regular withholding. However, it may be subject to backup withholding to ensure that income tax is collected on the income. The bank, broker, or other payer of interest, OID, dividends, cash patronage dividends, or royalties must withhold income tax on these reportable payments at a rate of 24% under backup withholding.

Backup withholding applies if:

1. You do not give the payer your TIN in the required manner;

2. The IRS notifies the payer that you gave an incorrect TIN;

3. The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you underreported interest or dividends on your income tax return; or

4. You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3).

Certification.

For new accounts paying interest or dividends, you must certify under penalties of perjury that your TIN is correct and that you are not subject to backup withholding. Your payer will give you a Form W-9, or similar form, to make this certification. If you fail to make this certification, backup withholding may begin immediately on your new account or investment.

Underreported interest and dividends.

You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that:

• You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or

• You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return.

How to stop backup withholding due to underreporting.

If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. You must show that at least one of the following situations applies.

• No underreporting occurred.

• You have a bona fide dispute with the IRS about whether underreporting occurred.

• Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future.

• You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments.

If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier.

How to stop backup withholding due to an incorrect TIN.

If the IRS notifies a payer that your TIN is incorrect, the payer must contact you and ask you to provide your correct TIN. Follow the instructions provided by the payer to prevent or stop backup withholding.

Reporting backup withholding.

If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. The information return will show any backup withholding as “Federal income tax withheld.”

Nonresident aliens.

Generally, payments made to nonresident aliens are not subject to backup withholding. You can use Form W-8BEN to certify exempt status. However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. See Pub. 519 for more information on the 30% rate.

Penalties.

There are civil and criminal penalties for giving false information to avoid backup withholding. The civil penalty is $500. The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both.

Where to report investment income.

Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. But see the rest of this publication for detailed information about reporting investment income.

Joint accounts.

If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law.

Community property states.

If you are married and you receive a distribution that is community income, half of the distribution generally is considered to be received by each spouse. If you file separate returns, you must each report one-half of any taxable distribution. See Pub. 555 for more information on community income.

If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions.

Example.

You and your spouse have a joint money market account. Under state law, half the income from the account belongs to you, and half belongs to your spouse. If you file separate returns, you each report half the income.

Income from property given to a child.

Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property.

Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation.

Savings account with parent as trustee.

Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true.

• The savings account legally belongs to the child.

• The parents are not legally permitted to use any of the funds to support the child.

Table 1-1. Where To Report Common Types of Investment Income

• See How To Report Interest Income and How To Report Dividend Income for more details.

Accuracy-related penalty.

An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence, disregard of rules and regulations, or substantial understatement of tax. For information on the penalty and any interest that applies, see Penalties in chapter 2.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 550 (2025), Investment Income and Expenses: Investment Income — General Information — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.