How Series EE Savings Bonds are Taxed - OBrien Shortle Reynolds & Sabotka, PC (2024)

FAQs

How do I pay tax on Series EE bonds? ›

The interest on EE bonds isn't taxed as it accrues unless the owner elects to have it taxed annually. If an election is made, all previously accrued but untaxed interest is also reported in the election year. In most cases, this election isn't made so bond holders receive the benefits of tax deferral.

Interest income from EE bonds is exempt from state and local taxes but not from federal taxes. The owner may receive tax relief if the funds go to funding qualified higher education.

While the Treasury will not penalize you for holding a U.S. Savings Bond past its date of maturity, the Internal Revenue Service will. Interest accumulated over the life of a U.S. Savings Bond must be reported on your 1040 form for the tax year in which you redeem the bond or it reaches final maturity.

Interest on I bonds is exempt from state and local taxes but taxed at the federal level at ordinary income-tax rates.

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.

Interest from your bonds goes on your federal income tax return on the same line with other interest income.

EE bonds earn interest until the first of these events: You cash in the bond or it reaches 30 years old. Therefore, many of these bonds have stopped earning interest. If you moved your EE bond into a TreasuryDirect account, we pay you for the bond as soon as it reaches 30 years and stops earning interest.

They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

At a bank: If a bank cashes your savings bond, they are responsible for getting you a 1099-INT. They may give or mail you the 1099-INT as soon as you cash the bond or they may wait until the following January.

Owners can wait to pay the taxes when they cash in the bond, when the bond matures, or when they relinquish the bond to another owner. Alternatively, they may pay the taxes yearly as interest accrues. 1 Most owners choose to defer the taxes until they redeem the bond.

Do you pay taxes when you cash in EE bonds? ›

I cashed some Series E, Series EE, and Series I savings bonds. How do I report the interest? In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.

Yes, you are required to pay federal income taxes on the interest earned by inherited series I savings bonds. The interest is taxed in the year it is earned and must be reported on the beneficiary's tax return.

Income from bonds issued by state, city, and local governments (municipal bonds, or munis) is generally free from federal taxes.

Do the address and Social Security Number on the bonds have to match the customer's address and Social Security Number? Not necessarily. The customer may have moved or the bonds may have been a gift and contain the purchaser's information.

The interest paid on savings bonds when they are redeemed is subject to federal taxation.

Savings bond interest is exempt from state and local income tax. Savings bond interest is subject to federal income tax; however, taxation can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first.

The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.