Series EE/E Savings Bonds Tax Considerations

The interest earned on your savings bonds is subject to federal income tax, which can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first. Savings bonds are subject to estate, inheritance, gift, or other excise taxes, whether federal or state.

Special tax benefits are available to qualified owners of EE Bonds under the Education Savings Bond Program. For more information, see Tax Reporting for the Education Savings Bond Program

Reissued EE Bonds

In some cases, when you have your savings bonds reissued, the transaction will be considered a reportable event for federal income tax purposes.

These events include:

  • The name of a living owner or principal co-owner doesn't appear on the reissued bond.
  • The name of a surviving beneficiary, or other person entitled to ownership doesn't appear on the reissued bond as owner or principal co-owner.

The principal co-owner is presumed to be responsible for reporting any interest for federal income tax purposes.

For taxable reissues, the person giving up ownership of the bonds will be sent an IRS Form 1099-INT shortly after the end of the tax year. This form will show the interest earned to the date of the reissue transaction. If the form shows interest earned and you have deferred reporting interest, you report interest earned on those bonds as income on your taxes for the year the reissue occurs.

The new owner or principal co-owner of the reissued bonds is responsible for interest earned after the date of the reissue transaction. More information and full instructions can be found in IRS Publication 550, Investment Income and Expenses

Redeemed EE Bonds

When you redeem your paper savings bonds and savings notes, the institution paying the bonds will report interest earned on the bonds or notes to you and to the IRS. You will receive an IRS Form 1099-INT from the institution, either at the time you redeem your bonds or shortly after the end of the year in which you redeemed the bonds.

For more information and instructions on 1099-INT reporting, see IRS Publication 550, "Investment Income and Expenses"

In TreasuryDirect, when taxable transactions occur, such as savings bonds that mature or are redeemed, a 1099-INT is generated for you within the application, and you can print a copy for your records.

Methods of Reporting Interest

You have the choice of reporting interest earned on savings bonds in several ways. Whenever you report savings bonds interest, it should be included with other interest income on your federal income tax return.

  • Cash Basis Reporting-federal tax is deferred until the year of final maturity, redemption, or other taxable disposition, whichever is earlier.
  • Accrual Basis Reporting-you report interest annually each year as it accrues. Once you start, you must continue to report interest earned annually for all savings bonds and notes you own and any you may acquire. This may be advantageous for EE/E Bonds in a child's name.

If you choose to report interest annually, you may want to get a copy of Public Debt Form 3501 This table compares the value of your bonds from one year to the next and will help you determine how much interest you should report.

If you choose to defer interest reporting, you may want to refer to IRS Publication 550 for full instructions and information.

Note: When electronic EE Bonds in TreasuryDirect accounts stop earning interest, they're automatically redeemed and the interest earned is reported for federal income tax purposes.

Reporting Responsibility

  • If you use your funds to buy a bond in your name and the name of another person as co-owners, you must report tax on the bond interest.
  • If you buy a bond in the name of another person who is the sole owner of the bond, the person for whom you bought the bond must report tax on the bond interest.
  • If you and another person buy a bond as co-owners, each contributing part of the purchase price, both you and the other co-owner report the tax in proportion to the amount each paid for the bond.
  • If you and your spouse, who live in a community property state, buy a bond that is community property, and if you file separate returns, both you and your spouse generally report the tax on one-half.

For more information, see IRS Publication 550 "Investment Income and Expenses".