- postpone (defer) reporting the interest until the year in which the first of these events occurs:
- You can either cash the bond and receive the full amount of the bond, including interest, or you can keep it and invest it.
Reporting the interest all at once at the end
The majority of people delay reporting interest until they file a federal income tax return for the year in which they receive the bond’s total value, including interest.
When electronic EE Bonds in a TreasuryDirect account stop generating interest, they are immediately paid, and the interest earned is reported to the Internal Revenue Service.
- If the bond is paid by a financial institution, you will receive a paper 1099-INT from that financial institution either soon after you cash your bonds or within the first two months after the year in which you cash your bonds.
- If you cash electronic bonds in your TreasuryDirect account, your 1099-INT will appear in your account early the following year. (Video)
Reporting the interest every year
For example, you could find it beneficial to declare interest on savings bonds in a child’s name once a year. When the bond matures, the child may be paying taxes at a lower rate than when the bond expires years later.
Even if you record the interest, you (or the child if the bond is in the child’s name) do not receive it every year.
After the bond is cashed or reissued to reflect a taxable change in ownership, the interest earned is reported on a 1099-INT. The 1099-INT will detail all of the bond’s interest earnings over the years. For information on how to advise the IRS that you had reported part or all of your interest in previous years, see IRS Publication 550, Investment Income and Expenses.
You must continue to record the interest every year after you start (for example, for a child in the child’s Social Security Number). for all of your savings bonds (or, for example, all of the child’s savings bonds) and any future bonds you purchase (or the child gets).
Our free Savings BondCalculator can help you figure out how much money you’ve made so far this year.
When you cash in your savings bonds, do you have to pay taxes?
Taxes can be paid when the bond is cashed in, when the bond matures, or when the bond is relinquished to another owner. They could also pay the taxes annually as interest accumulates. 1 The majority of bond owners choose to postpone paying taxes until the bond is redeemed.
When I cash in my savings bonds, will I receive a 1099?
On January of the following year, 1099-INTs are posted in TreasuryDirect. Use the ManageDirect page’s URL.
If you cash at a bank, the paperwork is provided. The bank may give you the form right away or mail it to you later, maybe after the year in which you cash the bond has ended.
If you cash with Treasury Retail Securities Services, the form will be mailed to you in January of the following year.
I’m not sure how to report savings bonds on my taxes.
You pay the face value of a Series I or electronic Series EE bond when you buy it. It earns interest until the bond is paid off. For example, suppose you pay $1,000 for a $1,000 bond. When the bond matures, you’ll receive the bond’s face value plus any accumulated interest.
Taxable interest income is the difference between the purchase price and the redemption value. Interest income from Series E, EE, and I bonds can be reported in one of the following ways:
- When the bond matures or you redeem it, whichever comes first, report the whole amount of interest earned.
You’ll get a Form 1099-INT when you redeem it, which displays the total amount of interest the bond earned. Every year, you can report the interest you’ve earned. If you do, the interest you paid tax on in previous years can be deducted from your taxable income.
You can even out your income across the years by reporting interest on a yearly basis. If the interest on your US Savings Bonds is high, this is a good option. For example, if you had $1 million in bonds, the interest at maturity may be $200,000 or more.
If you begin reporting bond interest each year, you must do so each year after that. This is true for:
For most investors, reporting the interest when the bond is redeemed is generally the best option.
Investing in bonds or cashing in bonds you’ve already purchased can help you pay for education. If each of these conditions are met, you can deduct bond interest from your taxable income:
The bond amount could exceed the overall education costs. If that’s the case, you can only deduct a fraction of the interest. To find out how much interest income you can deduct from your income, use Form 8815.
At higher income levels, the interest income exclusion is tapered away. The figures are based on adjusted gross income, which has been updated (AGI). Calculate your updated AGI using Form 8815.
The exclusion is not available if you file as married filing separately.
- Publication 550: Investment Income and Expenses (Including Capital Gains and Losses) (Including Capital Gains and Losses)
On my taxes, how do I report cashing in a savings bond?
Declare the savings bond interest alongside your other interest on the “Interest” line of your tax return if your total interest for the year is less than $1500 and you’re not otherwise required to report interest income on Schedule B. See the Schedule B Instructions for more details (Form 1040).
How can I save money on EE savings bonds without paying taxes?
Cashing your EE or I bonds before maturity and using the money to pay for education is one strategy to avoid paying taxes on the bond interest. The interest will not be taxable if you follow these guidelines:
- The bonds must be redeemed to pay for tuition and fees for you, your spouse, or a dependent, such as a kid listed on your tax return, at an undergraduate, graduate, or vocational school. The bonds can also be used to purchase a computer for yourself, a spouse, or a dependent. Room and board costs aren’t eligible, and grandparents can’t use this tax advantage to aid someone who isn’t classified as a dependent, such as a granddaughter.
- The bond profits must be used to pay for educational expenses in the year when the bonds are redeemed.
- High-earners are not eligible. For joint filers with modified adjusted gross incomes of more than $124,800 (more than $83,200 for other taxpayers), the interest exclusion begins to phase out and ceases when modified AGI reaches $154,800 ($98,200 for other filers).
The amount of interest you can omit is lowered proportionally if the profits from all EE and I bonds cashed in during the year exceed the qualified education expenditures paid that year.
How much do you pay in taxes on savings bonds?
Is the interest on savings bonds taxable? The interest you earn on your savings bonds is taxed at the federal level, but not at the state or local level. any federal estate, gift, and excise taxes, as well as any state inheritance or estate taxes
To cash a savings bond, what documentation do I need?
If you want to redeem a paper E/EE or I bond, you’ll need a few items. You’ll also need confirmation of identity, such as a driver’s license from the United States. You’ll also need an FS Form 1522 that hasn’t been signed. They’ll see you sign the document and then certify your signature if you go to your local bank or credit union.
The unsigned bonds, along with the signed FS Form 1522 and, if you’re the bond’s beneficiary, accompanying legal evidence or other papers to indicate you’re entitled to cash the bond, should be sent to the US Department of Treasury at:
The same steps apply for series H or HH paper bonds, only you’ll ship the unsigned bonds to the US Treasury at:
Is there a penalty for not cashing in savings bonds that have reached maturity?
Your link has finally matured after three decades of waiting. If you wish to cash in your bonds, you must follow specific requirements depending on the type of bond you have (paper or electronic).
- You can cash electronic savings bonds on the TreasuryDirect website, and you’ll get your money in two days.
- Most major financial institutions, such as your local bank, accept paper savings bonds.
If you can’t find your fully matured paper savings bond, you can have it electronically replaced by going to the TreasuryDirect website and filling out the necessary papers.
You’ll need the serial number of the bond, which serves as a unique identity. If this isn’t accessible, you’ll need other information, such as the exact month and year the bond was purchased, the owner’s Social Security number, and the names and addresses of the bond’s owners. Even if you’ve misplaced the bond, it’s possible to find it with a few efforts.
You can keep your bond after it matures, but you will not get any extra interest. On the one hand, because you can’t spend a savings bond without redeeming it, the value of your bonds is considered “secure.” On the other side, if your bond isn’t redeemed, you’ll miss out on additional sources of interest. With current inflation rates, it doesn’t make much sense to hold a bond that pays nothing and is losing money to inflation every day.
Finally, regardless of whether you redeem your bonds or not, you will owe taxes on them when they mature. In the year of maturity, make sure to include all earned and previously unreported interest on your tax return. If you don’t, you may be subject to a tax penalty for underpayment.
How can I make a bond claim?
Complete a Claim for Lost, Stolen, or Destroyed United States Savings Bonds to register a claim for a savings bond that has been lost, stolen, or destroyed (FS Form 1048). Please sign the form in the presence of a certifying officer who is authorized to do so (available at a bank, trust company, or credit union).
What bonds are free from federal taxes?
Federal income from state, city, and local government bonds (municipal bonds, or munis) is normally tax-free. However, you must record this income when you file your taxes.
In most cases, municipal bond income is tax-free in the state where the bond was issued. However, take in mind the following:
- Occasionally, a state that normally taxes municipal bond interest would exempt special bonds when they are issued.
Municipal bond income may potentially be free from local taxes, depending on your state’s regulations. For further information on the rules in your state, see a tax advisor.