As of June 30, 2016 there is $19,406,077,745 dollars (yes billion) worth of matured, unredeemed Savings Bonds with issue dates dating back to the 1930s and as current as the 1990s. The government has set up a website (www.treasurydirect.gov
) whereby you can enter your Social Security number and determine if you have any outstanding bonds. The site, however, is not all encompassing of the all types of bonds.
Series EE/E Savings Bonds Taxes
With the tax advantages of savings bonds, your bonds may be earning more than you think.
The interest that your savings bonds earn is subject to federal income tax, but not to state or local income tax. However, the bonds are not exempt from federal estate, gift, and excise taxes nor state estate or inheritance taxes.
Tip: Using the money for higher education may keep you from paying federal income tax on your savings bond interest. Be sure to research the requirements to qualify (www.treasurydirect.gov).
Here’s the responsible party for paying tax on the interest.
Two Methods to Report Interest
- You are the only owner of the bond – You pay.
- You use your money to buy a bond that you put in your name with a co-owner – You pay.
- You buy the bond but someone else is named as the only owner -- The person who is named as the owner pays (not you).
- You and another person buy a bond together, each putting in part of the money to buy the bond, and you are both named as co-owners -- You and the other person must each report the interest in proportion to how much you each paid for the bond.
- You and your spouse live in a community property state and buy a bond that is community property and you file separate federal income tax returns- You and your spouse each report one-half of the interest
- You give up ownership of the bond and the bond is reissued – You owe tax on the interest the bond earned until it was reissued.
- You are the new owner of a bond that was reissued – You owe tax on the interest the bond earns after it was reissued but when or after you redeem the bond
You have a choice on how you want to report interest:
1. Report the interest as it accrues annually
2. Report all the interest when the bond is redeemed (or reissued) or at its final maturity
You may want choose to report the interest every year on savings bonds in a child's name
because a child may be paying taxes at a lower rate than will be true years later when the bond matures.
Note: You (or the child if a bond is in the child's name) do not actually receive the interest every year even if you report it that way. The interest that the bond earns is reported on a 1099-INT after the bond is redeemed (cashed in) or is reissued to reflect a taxable change in ownership. The 1099-INT will show all the interest the bond has earned over the years.
Generally, once you start to report the interest every year (for example, for a child in the child's Social Security Number), you must continue to do so every year after that for all your savings bonds (or, for example, all the child's bonds), and any you acquire (or, the child acquires) in the future. If at some point you want to switch from deferred reporting to annual reporting of interest, you must do it for all your savings bonds. You must also report all interest earned up to the year of the change in reporting procedure.
Note: When electronic EE Bonds in a TreasuryDirect account stop earning interest, they are automatically redeemed and the interest earned is reported to the IRS.