Updated October 7, 2026. Quick answer: Schedule B (Form 1040) reports taxable interest and ordinary dividends by payer. It is required when taxable interest or ordinary dividends are over $1,500, and also for several special cases such as seller-financed mortgage interest, nominee income, accrued interest and bond premium adjustments. Part III asks about foreign accounts and foreign trusts and must be completed when either total is over $1,500. Interest goes in Part I, dividends in Part II.
Related reading on this site: IRS Publication 550.
Schedule A and Schedule B (Form 1040) for 2025, read line by line: Schedule B lines 1 to 4, Schedule B lines 5 and 6 and Schedule B line 8.
Form 8949 for 2025, read code by code: Form 8949 code N.
Form 1040 for 2025, read line by line: Form 1040 line by line, Form 1040 line 1z and Form 1040 lines 2a and 2b.
Read box by box from the IRS form text: Form 1099-OID box 1, Form 1099-OID box 8 and Form 1099-OID box 10.
More IRS forms and schedules, read line by line: Form 1042-S instructions.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 box 17 codes A, B and U.
The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 boxes 4 to 6.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 18, Schedule K-1 box 20 A and B and Schedule K-1 box 21.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 5 and Schedule K-1 box 6.
More IRS forms and schedules, read line by line: Form 1040 instructions and Form 5471 instructions.
When Schedule B is required
The instructions open with a list of triggers: “Use Schedule B (Form 1040) if any of the following applies.” The first is the dollar test: “You had over $1,500 of taxable interest or ordinary dividends.”
The other triggers are narrower. They cover interest from a seller-financed mortgage, accrued interest from a bond, original issue discount (OID) reported at less than the Form 1099-OID amount, interest reduced by amortizable bond premium, the exclusion for series EE or I savings bonds, nominee income, and foreign accounts or trusts. One is quoted here: “You received interest or ordinary dividends as a nominee.” The 1099 side of these numbers is covered on the 1099-DIV, 1099-INT and 1099-B boxes page.
The form repeats the threshold in two notes. After line 4 it says “Note: If line 4 is over $1,500, you must complete Part III.” After line 6 the note is the same for dividends.
Part I: interest, lines 1 to 4
Line 1 is a list by payer. “Report on line 1 all of your taxable interest.” “Include interest from series EE, H, HH, and I U.S. savings bonds.” Tax-exempt interest is kept off this line: “Don’t report on line 1 any tax-exempt interest.” Box 1 interest is explained on the Form 1099-INT box 1 page, and the savings bond and Treasury lines are on the box 3 page.
Line 2 adds line 1. Line 3 is the savings bond exclusion: “If, during 2025, you cashed series EE or I U.S. savings bonds issued after 1989 and you paid qualified higher education expenses for yourself, your spouse, or your dependents, you may be able to exclude part or all of the interest on those bonds.” Line 4 is line 2 minus line 3.
Seller-financed mortgages come first on the list: “list first any interest the buyer paid you on a mortgage or other form of seller financing.” The form also asks for the buyer’s name, address and SSN, and “If you don’t show the buyer’s name, address, and SSN, or let the buyer know your SSN, you may have to pay a $50 penalty.”
Nominee interest is reported in full and then backed out. “Under your last entry on line 1, put a subtotal of all interest listed on line 1.” “Subtract this amount from the subtotal and enter the result on line 2.” The instruction applies “even if you later distributed some or all of this income to others.”
A computed worked case, with figures chosen here for illustration: a Form 1099-INT shows $1,900 in total and $400 of it belongs to someone else. The subtotal on line 1 is $1,900 and the Nominee Distribution entry is $400 so line 2 is $1,900 minus $400 which is $1,500. With no savings bond exclusion, line 4 is also $1,500. That is not over $1,500, so the dollar test does not trigger Part III by itself. The nominee still has a filing duty: “you must give the actual owner a Form 1099-INT (unless the owner is your spouse) and file Forms 1096 and 1099-INT with the IRS.”
Accrued interest, OID and bond premium adjustments
The same subtotal method handles three adjustments. For accrued interest, “When you buy bonds between interest payment dates and pay accrued interest to the seller, this interest is taxable to the seller.” The amount subtracted is labelled Accrued Interest. For OID reported below the Form 1099-OID figure, the label is OID Adjustment.
For amortizable bond premium: “If you elect to reduce your interest income on a taxable bond by the amount of taxable amortizable bond premium, follow the rules earlier under Nominees to see how to report the interest.” The subtracted amount is labelled ABP Adjustment. There is a limit: “if the payer reported to you a net amount of interest income on the bond reflecting the offset of the gross amount of interest income by the amortizable bond premium, no reduction of the amount of interest income reported to you by the payer is permitted on Schedule B for the bond.”
Market discount and premium on the 1099 are covered on the boxes 10 to 13 page. On tax-exempt bonds, “The market discount on a tax-exempt bond is taxable interest income and not tax-exempt interest.”
Tax-exempt interest stays off Schedule B
Tax-exempt interest is reported on the Form 1040 itself. “In general, your tax-exempt stated interest should be shown in box 8 of Form 1099-INT” and “Enter the total on line 2a of your Form 1040 or 1040-SR.” Mutual fund exempt-interest dividends belong there too: “This amount should be shown in box 12 of Form 1099-DIV.” See the Form 1099-INT box 8 page for the 1099 side.
One cross-reference matters for the alternative minimum tax: “If an amount is shown in box 9 of Form 1099-INT, you must generally report it on line 2g of Form 6251.” If the bond was bought at a premium, only the net amount of tax-exempt interest goes on line 2a, meaning the interest received minus the amortized premium for the year.
Part II: ordinary dividends, lines 5 and 6
“Report on line 5 all of your ordinary dividends. This amount should be shown in box 1a of your Forms 1099-DIV or substitute statements.” Qualified dividends in box 1b are a subset and are not listed separately here; both boxes are explained on the 1099-DIV box 1a and 1b page.
Nominee dividends follow the same pattern as nominee interest. “Subtract this amount from the subtotal and enter the result on line 6.” The owner gets a Form 1099-DIV and Forms 1096 and 1099-DIV go to the IRS, with the same exception for a spouse.
There is also a pointer to a different form: “You may have to file Form 5471 if, in 2025, you were an officer or director of a foreign corporation.”
Part III: foreign accounts and trusts
The form states who completes this part: “You must complete this part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust.”
Line 7a has two questions. Question 1 asks about a financial interest in, or signature authority over, a foreign financial account, and the instruction is “Check the “Yes” box even if you aren’t required to file FinCEN Form 114.” The definition of an account is wide: “A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund”. Location matters: “A financial account is located in a foreign country if the account is physically located outside of the United States.”
Question 2 is the FBAR (FinCEN Form 114): “A U.S. person that has a financial interest in or signature authority over foreign financial accounts must file the form if the aggregate value of foreign financial accounts exceeds $10,000 at any time during 2025.” “Do not attach FinCEN Form 114 to your tax return.” Penalties are stated in the instructions: “you may have to pay a civil penalty up to $10,000.”
A separate form may also apply: “Regardless of whether you are required to file FinCEN Form 114 (FBAR), you may be required to file Form 8938, Statement of Specified Foreign Financial Assets, with your income tax return.”
Line 8 covers foreign trusts. “If you received a distribution from a foreign trust, you must provide additional information.” “Don’t attach Form 3520 to Form 1040 or Form 1040-SR.” Foreign tax reported on the 1099 is a different topic, covered on the boxes 4 to 7 page and on the Form 1116 page.
Which revision applies
The edition read for this page is the 2025 Schedule B (Form 1040) and its instructions, which are the revision irs.gov served when they were read on 2026-10-07. A later revision can change line numbers or wording, so check the revision printed on the form you are filling in. “For the latest information about developments related to Schedule B (Form 1040) and its instructions, such as legislation enacted after they were published, go to IRS.gov/ScheduleB.”
Every Schedule B line page in one table
Each row links to the page that reads a line, or group of lines, of Schedule B. The right column is the summary each page carries.
| Page | What it covers |
|---|---|
| Schedule B Lines 1 to 4: Interest Income (2025 Return) | How Schedule B lines 1 to 4 work on the 2025 return: listing each payer, nominee interest, savings bond exclusion, and the total that goes to Form 1040 line 2b. |
| Schedule B Lines 5 and 6: Ordinary Dividends (2025 Return) | How Schedule B lines 5 and 6 work on the 2025 return: listing each payer, box 1a of Form 1099-DIV, nominee dividends, and the total for Form 1040 line 3b. |
| Schedule B Line 7: Foreign Accounts and FBAR (2025) | How Schedule B line 7 works on the 2025 return: the foreign account question, FinCEN Form 114, the country list on line 7b, and the Form 8938 reminder. |
| Schedule B Line 8: Foreign Trust Distributions (2025) | How Schedule B line 8 works on the 2025 return: the foreign trust question, when Form 3520 may be needed, and why it is not attached to Form 1040. |
Common mistakes
- Treating the $1,500 test as the only trigger. Seller-financed mortgage interest, nominee income, accrued interest, OID and bond premium adjustments, and the savings bond exclusion each require Schedule B on their own.
- Listing tax-exempt interest on line 1. It goes on line 2a of Form 1040 or 1040-SR, not on Schedule B.
- Answering the foreign account question by whether FinCEN Form 114 is required. Question 1 on line 7a is Yes for any financial interest or signature authority, even when no FBAR is due.
Related: Form 1099-INT box 1, Form 1099-DIV boxes 1a and 1b, Form 1116, and Form 8949.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for taxable accounts
If your portfolio is $250,000 or more, this connects you (free, with no obligation to hire anyone) with 2 to 3 vetted advisors.
Before you start, what actually happens. The matching service is run by WiserAdvisor, an independent advisor-matching company. It opens on their site, asks for your ZIP code and a few questions, and matches you with 2 to 3 vetted advisors. It is free to you.
WiserAdvisor states the service is built for portfolios of $250,000 and above. By submitting, you consent to emails, phone calls and text messages from WiserAdvisor and up to three advisors, so expect to be contacted. Clear Money Guide may earn a referral payment for a qualifying completed form, whether or not you ever hire anyone.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor fits your investing
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment through this service, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Instructions for Schedule B (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/i1040sb.pdf
- Schedule B (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/f1040sb.pdf
Read from the IRS documents linked above on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.