How do I avoid paying taxes on savings bonds? (2024)

How do I avoid paying taxes on savings bonds?

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.

How do I cash in my savings bonds and avoid taxes?

How much tax do you pay on a savings bond?

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.

Do you pay income taxes on EE bonds when cashed?

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.

Do I pay taxes on I bonds if I don't cash out?

Holding I Bonds Until Maturity

If you keep the I bonds through the date they mature, generally 30 years, and you didn't otherwise include the interest income in a prior year, you will be taxed on all the accrued but previously untaxed interest in the year of maturity, whether or not you cash them in.

How much is a $100 EE savings bond worth after 30 years?

What is the best way to cash in savings bonds?

The only option for cashing electronic savings bonds is by logging in to your TreasuryDirect account online. If you have paper savings bonds, you can fill out the appropriate form and mail it and the bonds you want to cash to the Treasury Retail Securities Services — the address is listed on FS Form 1522.

Do you get a 1099 when you cash in savings bonds?

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.

Will I get a 1099 for savings bonds?

If you cash a paper savings bond by mailing it to Treasury Retail Securities Services, we mail you a 1099 by January 31 of the following year. (You can call us for a duplicate statement, if needed, beginning February 15.)

Is there a penalty for not cashing in matured EE savings bonds?

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.

Which bonds are tax-exempt?

Municipal Bonds

Most bonds issued by government agencies are tax-exempt. This means interest on these bonds are excluded from gross income for federal tax purposes.

When should I cash my EE bonds?

You can cash in (redeem) your EE bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.

Is it a good time to cash in EE bonds?

If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it's a good idea to cash them in because you won't get any extra benefit.

How do I report cashing in a savings bond on taxes?

When you redeem it, you'll receive a Form 1099-INT that shows the full amount of interest the bond earned. You can report the interest earned every year. If you do, you can subtract the interest you paid tax on in prior years from your taxable income.

Does it matter whose Social Security number is on a savings bond?

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.

What interest income is not taxable?

Interest earned on certain U.S. savings bonds, such as Series EE and Series I bonds, is exempt from state and local income taxes. Government bonds such as Series HH bonds and Treasury Inflation-Protected Securities (TIPS) may also be tax-exempt. Interest earned on 529 plans is usually exempt from federal taxes.

How much is a $50 Patriot bond worth after 20 years?

After 20 years, the Patriot Bond is guaranteed to be worth at least face value. So a $50 Patriot Bond, which was bought for $25, will be worth at least $50 after 20 years. It can continue to accrue interest for as many as 10 more years after that.

Do EE bonds really double in 20 years?

EE bonds you buy now have a fixed interest rate that you know when you buy the bond. That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it.

How long does it take for a $100 EE savings bond to mature?

All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.

Is there a bad time to cash in savings bonds?

Most bonds can be cashed in after one year, but you will lose three months' worth of interest if you cash them in before five years.

Can I cash my deceased parents savings bonds?

TO CASH BONDS FOR A DECEDENT'S ESTATE:

Series EE, Series E, and Series I bonds can be cashed at a local financial institution. Some of these transactions may have to be forwarded for further processing. Series HH and Series H bonds must be sent to one of the addresses shown at the bottom of the following page.

Can my bank cash my savings bonds?

Banks and credit unions can redeem savings bonds over the counter.

Who pays taxes on redeemed savings bonds?

The interest income of the savings bond will be taxed to the bond's owner—i.e., the recipient of the gift—when the bond matures and is redeemed for cash (or the owner will be taxed each year if they elect to report the interest income annually).

Can a POA cash in savings bonds?

In addition, individuals can self-appoint an attorney-in-fact to cash in bonds on their behalf. A durable power of attorney document is required.

Do I have to pay taxes on Series I savings bonds?

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.