Tax Implications for Savings Bonds

Posted by Christian Wynns on May 6th, 2016

Here’s a reminder about the tax rules for owners of Savings Bonds.  Generally, interest on savings bonds must be reported as income on the 1040 in the year the bonds mature or when they are redeemed, whichever is earlier.  Holders of HH bonds report and pay US tax on interest annually as it’s paid to them.  But interest in EE and I bonds used to pay for education may be tax-free, as long as certain rules are followed.  The bonds must be redeemed to pay for vocational school, college, or graduate school tuition fees for the taxpayer, spouse or dependent.  Interest on US savings bonds is exempt from state and local income taxes.

Contact your local CPA to determine your tax implications or if you have any questions.