Are Cash Deposits Taxed? What You Need to Know

The act of depositing cash into a bank account is not a taxable event in itself. The United States tax system is based on the receipt of income, not on the movement of your own money between locations. Simply transferring funds you already possess does not create income and, therefore, does not trigger an immediate tax liability. The core question for tax purposes is not about the deposit, but about how you acquired the cash. The Internal Revenue Service (IRS) is concerned with earnings that generate new wealth, and the source of your money determines whether the funds must be reported on your annual tax return.

Bank Reporting Requirements for Cash Transactions

While depositing cash is not a taxable event, it can trigger reporting requirements for the financial institution. Under the Bank Secrecy Act, banks are legally obligated to help the government combat financial crimes. They must file a Currency Transaction Report (CTR) for any cash transaction or series of related cash transactions that exceed $10,000 in a single business day. This report is filed electronically with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

The CTR, officially FinCEN Form 112, includes details about the person conducting the transaction, such as their name, address, and Social Security number. The purpose of this report is to create a paper trail that can be used to detect and deter illegal activities like money laundering. It is a standard procedure and does not automatically imply that the individual is under suspicion of any wrongdoing or that they will owe taxes on the deposited amount.

The threshold applies to aggregated transactions as well. For instance, if you deposit $6,000 in cash in the morning and another $5,000 in the afternoon of the same business day, the bank is required to file a CTR. The bank must file the report within 15 calendar days of the transaction.

Determining the Taxability of Your Cash

The taxability of your deposited cash depends entirely on its source. If the cash was earned, it is likely taxable; if it was received as a gift or a loan, it is not.

Sources of Taxable Cash

Cash received as payment for goods or services is considered income and must be reported. For a sole proprietor or independent contractor, this includes all revenue from their business activities, which would be reported on Schedule C (Form 1040). This applies even if the client does not issue a Form 1099-NEC, as all income is taxable. Other common sources of taxable cash include wages paid by an employer, tips received in a service industry, and certain gambling winnings. If you sell an asset for a profit, the capital gain is also taxable income.

Sources of Non-Taxable Cash

Many types of cash deposits are not considered income and are not taxable to the recipient. A common example is a gift from a friend or family member, where the responsibility for any potential gift tax falls on the giver. For 2025, an individual can give up to $19,000 to any other individual without having to file a gift tax return. Other non-taxable sources include the proceeds from a loan, a reimbursement for a shared expense, or selling a personal item for less than you originally paid for it.

The Prohibition Against Structuring Deposits

It is illegal to intentionally break up a large cash transaction into multiple smaller deposits to avoid triggering the bank’s $10,000 reporting threshold. This practice is known as “structuring,” and it is a federal crime. The act of structuring is illegal in itself, regardless of whether the cash was obtained from legal or illegal activities. Deliberately manipulating deposits to stay under the reporting limit is a criminal offense even if the money is from legitimate earnings and all taxes have been paid.

Financial institutions are trained to detect patterns that suggest structuring, such as making several deposits of $9,000 over consecutive days. If a bank teller suspects structuring, they are required to file a Suspicious Activity Report (SAR) with FinCEN, which can trigger an investigation.

The penalties for structuring can be severe, including fines of up to $250,000 and imprisonment for up to five years. These penalties can be doubled if the structuring involves more than $100,000 in a 12-month period or is done in conjunction with another federal crime.

Record Keeping and Tax Filing for Cash Income

Once you determine that your cash is from a taxable source, record-keeping is important. For self-employed individuals, this means maintaining a detailed log of all cash payments received. This log should include the date, the amount received, the name of the payer, and a description of the service provided. Issuing receipts to customers and keeping copies of invoices can provide documentation to support your reported income.

When it comes time to file your taxes, this cash income must be included on your tax return. A sole proprietor would report their total gross receipts on Schedule C (Form 1040). From this gross income, you can then deduct eligible business expenses to determine your net taxable profit. You must file a tax return if your net self-employment earnings are $400 or more.

For cash income that is not from self-employment, such as certain awards or miscellaneous earnings, it is reported on Schedule 1 (Form 1040) as “Other Income.” Keeping clear records throughout the year prevents the difficult task of reconstructing your income months later and ensures you can accurately report your total earnings to the IRS.