4926d2180ca4fe62abdff3f545965611 - Do High-Yield Savings Account Earnings Get Taxed?
Vadym Pastukh /

High-yield savings accounts help you grow your long-term savings by earning interest. As interest rates continue to rise in 2023, you can take advantage of high APYs to maximize your savings. But before you open your first high-yield savings account, you might be wondering: Do I get taxed on a high-yield savings account?

The interest you earn from your high-yield savings account is taxed as income. However, opening a high-yield savings account is still a great way to boost your savings. Here are four key things you need to know about your high-yield savings account.

4 Things To Know About Your High-Yield Savings Account

If you’re debating between investing or saving your money, here are a few important points to consider:

1. A high-yield savings account is a secure place to keep your money. Your funds are covered by FDIC or NCUA insurance, up to the coverage limits that apply.

2. Interest rates are currently at a 22-year peak, making it a great time to start saving money in a high-yield savings account.

3. Interest earned on high-yield savings accounts is taxed as earned income and must be reported to the IRS. The exact amount of taxes owed depends on your 2023 tax bracket.

4. The annual percentage yield (APY) on your high-yield savings account will fluctuate over time as interest rates rise and fall. However, even a lower APY on a high-yield savings account is still higher than the national average APY for regular savings accounts.

Consider opening a high-yield savings account with an online bank, as they typically offer higher interest rates compared to traditional banks. Keep in mind that most high-yield savings accounts come with withdrawal limits, so plan your withdrawals accordingly.

Overall, opening a high-yield savings account is a beneficial choice despite the taxes on the interest earned and the fluctuating APY. It allows your savings to grow at a higher rate than a standard savings account, and with the current high interest rates, it’s an opportune time to start saving.

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