Why Savings Bond Owners Should Review Their Bonds In December
Posted on November 26, 2017
Savingsbonds.com declares December as U.S. Savings Bond Month the best time to review savings bond investments to avoid potential tax time headaches and take advantage of beneficial tax reporting options, including:
1. All of the interest earned on redeemed savings bonds or those that have reached final maturity (even if not yet redeemed) need to be reported on a Federal Income Tax return.
Despite access to complimentary on-line bond calculators and management tools, most bond owners don’t understand the IRS rules and potential tax liabilities associated with savings bonds.
Additionally, older paper savings bonds are often worth a lot more than their face value (the amount printed on the bond). The difference between the purchase price and the cash-in value is considered report-able interest income. Receiving more money than expected can be serendipitous. However, the 1099-INT (indicating of the interest earned) can be an unpleasant financial surprise.
Each December, investors can review a list of redeemed (paper) bonds for that year as well as the interest earned amounts that will need to be reported at tax time via their SavingsBonds.com VIP Membership©.
2. Retirees or individuals on fixed incomes, should do what if scenarios to determine if cashing in some bonds now may help avoid large interest income reporting requirements in the future.
SavingsBonds.coms Cash-In Report© allows investors to run different redemption scenarios from their bond portfolio. By entering an amount of money you would like to receive, the report suggests the best bonds to redeem (based on overall interest rate performance). The amount of interest earned for those (potentially) redeemed bonds, is also indicated.
Cashing in some bonds now, prior to the bonds final maturity may be a sensible solution to avoid having to report a potentially large amount(s) of interest income in any single year when bonds reach their final maturity and interest should be reported (according to IRS rules).
3. Consider reporting savings bond interest earned annually for yourself and your children.
Few bond owners are aware of the option to report the interest earned annually on their savings bonds. By reporting interest annually, a bond owner may not owe any federal taxes when the bond(s) are redeemed, if executed properly.
Reporting interest annually can start at any time prior to a bonds final maturity. Once elected, all the lifetime interest earned since issuance on all bonds in a portfolio will need to be reported. Each year thereafter, annual interest earned amounts must be reported on the bonds (and any future bond purchases) in an individuals portfolio until forms to opt out of annual reporting are submitted and approved by IRS.
For those that are on or about to be on a fixed income, annual interest reporting could be a wise decision. Parents may also want to consider reporting interest annually on their childs income tax return because each child has an exemption before they are required to pay any taxes. Individuals should check with a tax or financial professional on this issue.
Many bond owners also dont take advantage of the annual interest reporting option because it used to be a very cumbersome (and sometimes costly) task to determine the lifetime and annual interest earned amounts. Annual interest amounts can now be quickly determined each December by reviewing ones Savings Bond Inventory Report©.
Checking savings bonds during the holiday season may not be at the top of most investors lists. However, by reviewing a bond portfolio each December, investors may be able to take advantage of possible cash in and tax planning strategies. This could result in being a lot merrier during tax time and for years to come.
SavingsBonds.coms complimentary calculator provides cash in values, interest rates and a personalized, printable, color-coded, Savings Bond Inventory Report along with a What This Means To You explanation. For ongoing savings bond management & updated bond values via unique monthly e-Bond Statements, try a free 14-day trial of the SavingsBonds.com VIP Membership which includes a helpful Cash-In-Report.©