If a taxpayer receives interest credited to their bank account in December 2023, in which year must it be reported as gross income?

The correct understanding in this scenario is rooted in the principle of when income is considered realized for tax reporting purposes. Interest income is typically taxed in the year it is received or credited to the taxpayer's account. Since the taxpayer received interest credited to their bank account in December 2023, it is understood that they are able to access and utilize these funds in that same year. As such, this income must be reported on the tax return for the year 2023, which aligns with the general guideline that income is reported in the tax year when it is received, regardless of when the actual interest was accrued.

The choice indicating the year 2024 is not appropriate because it fails to recognize that the interest credited in December 2023 constitutes a realization of income within that calendar year. Taxpayers report interest on the tax return that corresponds to the year in which it was made available to them, thus reinforcing the principle of income recognition upon receipt.