Schedule B Form 1040: When American Expats Must File for Interest & Dividends
- What Is Schedule B and When Do I Need to File It?
- How Much Interest Income Triggers Schedule B Filing?
- Do I Have to Report My Foreign Bank Accounts on Schedule B?
- Will I Owe US Taxes on My Interest and Dividend Income?
- How Do I File Schedule B with Form 1040?
- What Mistakes Do Expats Make with Schedule B?
- Should I Be Worried About Filing Schedule B?
- When Should I Get Professional Help with Schedule B?
- What Are My Next Steps?
Here’s a surprising fact: The $1,500 Schedule B threshold hasn’t changed since the 1970s, but with high-yield savings accounts now offering 4-5% APY, hitting that threshold is easier than ever. American expats must file Schedule B (Form 1040) when they have over $1,500 of taxable interest or ordinary dividends, OR when they have foreign financial accounts – regardless of income amount.
When you must file Schedule B:
- Your total interest and dividend income exceeds $1,500 (across all accounts combined)
- You have foreign bank accounts, investments, or financial relationships
- You received interest from seller-financed mortgages or have accrued bond interest
Most importantly, filing Schedule B doesn’t mean you’ll owe US taxes. The same protections that keep most expats’ tax bills at $0 – like the Foreign Earned Income Exclusion and Foreign Tax Credits – apply to investment income too.
What Is Schedule B and When Do I Need to File It?
Schedule B (Form 1040) reports interest and dividend income to the IRS. You must file Schedule B if you had over $1,500 of taxable interest or ordinary dividends, received interest from a seller-financed mortgage, had accrued interest from a bond, or had a financial interest in foreign accounts.
The $1,500 Rule Explained
This threshold includes interest from all sources combined:
- US bank accounts and high-yield savings
- Foreign bank accounts
- Money market accounts and CDs
- Bond interest and treasury securities
- Dividend income from stocks or mutual funds
The $1,500 threshold applies to your total interest income across all accounts, not per account. Splitting your money between multiple banks won’t help.
Foreign Account Reporting
Even if your interest income is under $1,500, you must file Schedule B if you have foreign financial accounts. Part III asks specific questions about foreign accounts and trusts that every expat with foreign banking relationships must answer.
How Much Interest Income Triggers Schedule B Filing?
With today’s high-yield savings accounts offering rates above 4%, hitting the $1,500 threshold happens faster than you might expect. If you have around $40,000 in savings earning 4% annually, you’ll generate over $1,500 in interest.
Real Expat Examples:
Corporate Expat in Germany:
- US savings account interest: $800
- German bank account interest: $400
- Investment dividend income: $500
- Total: $1,700 (requires Schedule B)
Digital Nomad in Thailand:
- US high-yield savings: $1,200
- Thai bank interest: $200
- Total: $1,400 (no Schedule B required for income threshold, but foreign account reporting still applies)
Even if you don’t meet the income threshold, having foreign accounts means you’ll likely need Schedule B anyway for the foreign account reporting questions.
Do I Have to Report My Foreign Bank Accounts on Schedule B?
Yes, this is where Schedule B becomes critical for most expats, regardless of income level. Part III of Schedule B has questions about foreign accounts and trusts that you must answer if you have foreign financial relationships.
The form asks two key questions:
- Do you have a financial interest in or signature authority over a financial account in a foreign country?
- Did you receive a distribution from, or were you a grantor or transferor to, a foreign trust?
If you answer “yes” to foreign accounts, you must provide the name of the foreign country where your accounts are located.
Having foreign accounts doesn’t mean you’ll owe additional US taxes. Schedule B is informational reporting. Your real tax protection comes from the Foreign Earned Income Exclusion and Foreign Tax Credits.
Connection to FBAR: If your foreign accounts have an aggregate maximum balance over $10,000 at any point during the year, you’ll also need to file FinCEN Form 114 (FBAR) separately by April 15, with an automatic extension to October 15.
Will I Owe US Taxes on My Interest and Dividend Income?
Here’s the reassuring reality: most expats with modest investment income owe little to no US taxes after applying available protections.
Foreign Tax Credit Protection
If you paid foreign taxes on interest or dividend income earned abroad, you can claim the Foreign Tax Credit to offset your US tax liability dollar-for-dollar. This frequently eliminates any US tax owed on foreign-sourced investment income.
Standard Deduction Benefit
For tax year 2025, the standard deduction rises to $15,000 for single filers and $30,000 for married couples filing jointly. You typically owe no federal income tax if your total income falls within these ranges.
Example That Shows $0 Owed:
- Interest/dividend income: $2,000
- Other income: $8,000
- Total income: $10,000
- Standard deduction: $15,000
- Taxable income: $0
- Federal tax owed: $0
How Do I File Schedule B with Form 1040?
Filing Schedule B is simpler than most expats expect. The form walks you through each requirement step-by-step, and you’ll attach the completed Schedule B to your Form 1040 when you file your tax return.
Step 1: Gather Your Income Documents
Collect all Forms 1099-INT (interest income) and 1099-DIV (dividend income) from US sources, plus foreign account statements showing interest earned. Convert foreign currency amounts to US dollars using the average exchange rate for the tax year.
Step 2: Complete Part I – Interest Income
List each payer’s name and the interest amount received. Include all sources: US banks, foreign banks, money market accounts, CDs, and bonds. Add up the total and enter it on line 2.
Step 3: Complete Part II – Dividend Income
List each payer’s name and ordinary dividend amount from Forms 1099-DIV. This includes dividends from US stocks, mutual funds, and foreign investments. Total the amounts on line 6.
Step 4: Answer Part III – Foreign Accounts and Trusts
This is the critical section for expats. Answer “yes” or “no” to both questions about foreign financial accounts and foreign trusts. If you answer “yes” to foreign accounts, list the countries where your accounts are located.
Step 5: Transfer Totals to Form 1040
Enter your total interest income (Schedule B, line 2) on Form 1040, line 2b. Enter total dividend income (Schedule B, line 6) on Form 1040, line 3b. Check the box indicating you’re attaching Schedule B.
Even if you use tax software, review Part III carefully. The foreign account questions apply to most expats and are easy to miss if you’re rushing through the process.
What Mistakes Do Expats Make with Schedule B?
Mistake 1: Thinking Foreign Accounts Are Optional to Report
The IRS receives information from foreign financial institutions through automatic exchange agreements. Always report foreign accounts honestly on Schedule B.
Mistake 2: Converting Foreign Currency Incorrectly
Report foreign interest income converted to US dollars using the average exchange rate for the year, or the rate on the date received.
Mistake 3: Forgetting About Different Types of Accounts
Investment accounts, pension plans with cash value, and even some employer-sponsored foreign accounts might trigger Schedule B reporting requirements.
Mistake 4: Confusing Schedule B with FBAR
Schedule B foreign account reporting and FBAR filing are separate requirements with different deadlines and purposes. Both may be required if you meet the thresholds.
Should I Be Worried About Filing Schedule B?
No. Schedule B is straightforward paperwork, not a red flag. The IRS wants transparency about income sources, especially foreign accounts, but filing Schedule B doesn’t increase your audit risk or suggest you’re doing anything wrong.
If you’re behind on filing tax returns and have foreign accounts, the IRS Streamlined Procedures often allow you to catch up with minimal penalties. Don’t let fear of complexity keep you from getting current.
When Should I Get Professional Help with Schedule B?
Consider working with an expat tax specialist if you have:
- Multiple foreign accounts across different countries
- Foreign mutual funds or complex investments
- Questions about treaty benefits and foreign tax credits
- Years of unfiled returns with foreign income
- Form 8938 (FATCA) reporting requirements in addition to Schedule B
We have a rigorous hiring process for both our accountants and customer service representatives. Only an excellent CPA or Enrolled Agent will touch your return from start to finish. Peace of mind is something we deliver year-round, not just during tax season.
What Are My Next Steps?
- If your interest/dividends are under $1,500 and you have no foreign accounts: You likely don’t need Schedule B. Simply report your income on the appropriate lines of Form 1040.
- If you exceed the $1,500 threshold or have foreign accounts: File Schedule B with your tax return. The form walks you through each requirement step by step.
- If you’re behind on filing: Don’t panic. The Streamlined Procedures exist specifically to help expats get current without severe penalties.
Have questions about Schedule B requirements or your specific situation? Contact our Customer Champions. If you’re ready to be matched with a Greenback accountant, click the get started button below.
This article provides general information about Schedule B filing requirements for American expats. Tax situations vary, and you should consult with a qualified tax professional for advice specific to your circumstances. All dollar amounts and thresholds have been verified against current IRS sources as of July 2025.
