IRS Schedule B “Interest and Ordinary Dividends” Explained

Schedule B (Form 1040), Interest and Ordinary Dividends, lists the sources of your taxable interest and ordinary dividends. It also asks important questions about foreign accounts and foreign trusts. Many taxpayers don’t need it, but when you do, the foreign account questions carry serious penalties if they’re answered wrong.

When You Must File Schedule B

• Your taxable interest or ordinary dividends are more than $1,500
• You received interest from a seller-financed mortgage where the buyer used the property as a home
• You’re reporting nominee interest or dividends (amounts received for someone else), accrued bond interest, OID adjustments, or excludable savings bond interest
• You had a financial interest in, or signature authority over, a foreign financial account, or you received a distribution from or were a grantor of a foreign trust

Part I: Interest

List each payer and amount, usually from Form 1099-INT. Interest from a seller-financed mortgage requires the buyer’s name, address and SSN. Excludable U.S. savings bond interest used for higher education is figured on Form 8815.

Part II: Ordinary Dividends

List each payer and the ordinary dividend amount, usually Box 1a of Form 1099-DIV. Qualified dividends are a subset of ordinary dividends. They’re taxed at long-term capital gains rates, but they’re still listed here as ordinary dividends.

Part III: Foreign Accounts and Trusts

Everyone who files Schedule B must answer these questions:

• Did you have a financial interest in or signature authority over a financial account in a foreign country?
• If yes, are you required to file FinCEN Form 114 (FBAR)? An FBAR is generally required if the combined value of your foreign accounts exceeded $10,000 at any time during the year.
• Did you receive a distribution from, or were you the grantor of or transferor to, a foreign trust? If so, you may need Form 3520.

Some taxpayers must also file Form 8938 (Statement of Specified Foreign Financial Assets) with their return. Penalties for missing FBAR or Form 8938 filings can be severe, so get help if you have foreign accounts.

Where the Totals Go

Totals from Parts I and II carry to Form 1040. Qualified dividends and capital gain distributions are taxed using the capital gains worksheet. High-income taxpayers may also owe the 3.8% net investment income tax.

Diehl CPA works with investors on interest, dividends and portfolio income. See our investment tax planning services.

Get Help From Diehl CPA

Tax rules change often, and the right answer depends on your full financial picture. Diehl CPA, led by Mark Diehl, CPA, CFE, prepares returns and builds tax plans for investors, retirees and closely held businesses. Learn about our tax return preparation and investment tax planning services, or contact us to talk through your situation.

This article is general information, not tax or legal advice for your specific situation. Updated October 2026.