Do I have to pay tax on US Savings Bonds?
|
US Savings Bonds - Series E and EE Bonds, and Freedom Shares
First offered in May, 1941 Series E - US Savings Bonds, and its successor, Series
EE - US Savings Bonds,
offer tax deferred accumulation of interest until you redeem the US Savings
Bonds. Series EE US Savings Bonds
have been offered since January 1980. Series EE US Savings Bonds can be purchased for
˝ their
face value. The difference between the US Savings Bonds purchase price and the redemption value is your
taxable interest. You don't have to report the taxable interest on
your tax return until you redeem the US Savings Bonds or they finally
mature. However, you can make an election to report the taxable interest on
your tax return annually. Because US Savings Bonds are issued by the federal government you do not have to pay state
tax or local tax on the interest. You'll receive a Form 1099-INT in the
tax year that the US Savings Bonds are redeemed.
Freedom Shares, which were issued between 1967 and 1970 work the same way as Series E and
EE US Savings Bonds.All of the accumulated interest on E and EE
US Savings Bonds is taxable in the tax year that
they mature and must be reported on your tax return. One way to avoid the tax is to trade the E or EE US Savings
Bonds for HH bonds. This
will continue to defer the tax and you won't need to report the tax on your tax return. Special
tax rules apply for US
Savings Bond Tuition Plans.
US Savings Bonds - Series H and HH Bonds
Series H US Savings Bonds were issued between February 1957 and December 1979.
Series H US Savings Bonds were available
for purchase or you could exchange your Series E US Savings Bonds for them. Series H
US Savings Bonds were
bought at face value and pay semi-annual interest which is taxable and must
be reported on your tax return.
You must report the accumulated interest from any Series E
US Savings Bonds that were exchanged for
Series H US Savings Bonds upon redemption or final maturity of the Series H US Savings
Bonds on your tax return.
Series HH US Savings Bonds cannot be purchased and are offered only in exchange for Series E and
EE US Savings Bonds or Freedom Shares. They pay semi-annual interest that is taxable in the
tax year received and must be reported on your tax return.
US Savings Bonds - I-Bonds
I-Bonds are inflation indexed
US Savings Bonds which allow the deferral of income tax until the I-Bond is redeemed or it
matures at which time you must report the interest on your tax return.
Below is a table of the different kinds of
US Savings Bonds, their issue dates, and their final
maturity dates.
|
|
| US Savings Bond Maturity Dates |
| US
Savings Bond Type |
US
Savings Bond Issue Date |
US
Savings Bond Maturity Date |
| Series E |
May 1941 -
November 1965 |
40 yrs.
after issue |
| Series E |
December 1965 -
June 1980 |
30 yrs.
after issue |
| Series EE |
January 1980 -
present |
30 yrs.
after issue |
| Savings Notes
(Freedom Shares) |
May 1967 -
October 1970 |
30 yrs.
after issue |
| Series H |
February 1957 -
December 1979 |
30 yrs.
after issue |
| Series HH |
January 1980 -
present |
20 yrs.
after issue |
| Series I Bonds |
Present |
30 yrs.
after issue |
|
|
| You must give the payer of your interest income your correct social security number.
If you do not, you may be subject to a tax penalty and to back-up tax withholding. For more
information see "What is Form
W-9 and backup tax withholding?" You should receive
Form 1099-INT for interest income and an Form
1099-OID for original issue discount from any paying institutions. You may receive a
similar or substitute tax statement from each payer. Payers of interest of $10 or more are
required to furnish you and the IRS with this tax information. This tax information is also usually included
on your year-end account statement. Even if you do not receive a tax statement or
Form 1099
you are still responsible for reporting all taxable interest income on your tax return. The IRS is notified
of all interest paid by financial institutions on magnetic media. If you do not include
your interest income on your tax return the IRS will know when their computer system
matches your tax return to the tax information provided by payers. You will then be notified,
usually by mail, of the amount of additional tax, interest, and penalties that you
owe.
Interest of $1,500 or Less
If your taxable interest income is $1,500 or less, you need to show that
taxable income on Line 8a of Form 1040
or Form 1040A, or
Line 2 of Form 1040EZ.
Interest of More Than
$1,500
If your taxable interest income is more than $1,500 you must file Form 1040 or
Form 1040A.
You cannot file Form 1040EZ. Start by showing your interest income on Form 1040, Schedule B, or on
Schedule 1 of
Form
1040A. FolIow the instructions and this will carry over the information to
Line 8a
of Form 1040 or Form 1040A.
|
|
|
 |
Related tax
information about US Savings Bonds |
|
|
US
Income Related Questions and Answers |
|
IRS publications about
US Savings Bonds:
For additional tax information about US Savings Bonds refer to
IRS Publication 550, Investment
Income and Expenses. Also see
IRS Publication
17, Your Federal Income Tax. |
|
 |
|
 |
Ask Julian Block your IRS and tax questions! |
|
|
 |
If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
|
|
|
