Oregon Tax Consultants Practice Exam

Where is taxable interest income reported?

1. 1040 Line 2a

2. Schedule B

3. Schedule E

4. Form 8889

The correct answer is: Schedule B

Taxable interest income is reported on Schedule B of Form 1040. Schedule B is specifically designed to capture interest and dividend income. It provides additional details regarding the sources of such income, which is important for tax purposes. This schedule allows taxpayers to list out the different accounts or investments that generated interest income during the tax year. In contrast, Line 2a of Form 1040 simply represents the total amount of taxable interest income, which is derived from Schedule B. Therefore, while Line 2a reflects the final figured total, it does not provide the detailed breakdown or the necessary information about the sources of interest that Schedule B does. Schedule E, on the other hand, is used for reporting income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits. Thus, it is not applicable for reporting interest income. Form 8889 is related to Health Savings Accounts (HSAs) and is used to report contributions to and distributions from HSAs. Since it does not pertain to interest income at all, it would not be a correct answer in this context. Hence, the choice of Schedule B is the most accurate place for reporting taxable interest income