savings bond taxes

What Taxes Will I Owe When Cashing In Savings Bonds?

savings bonds

Series EE and I Savings Bonds are subject to federal income taxes when redeemed. Savings Bonds are exempt from state and local taxes but not certain estate taxes. Understand what taxes will be owed when redeeming bonds, and how to avoid having to report a lot of interest income and other tax benefit owning savings bonds.


When cashing in savings bonds, all of the interest income must be reported on a Federal Income Tax Return, unless previously reported. The difference between the purchase price (often half the face amount printed on most paper bonds) and the cash in value – which can be worth a lot more than the face amount – is considered reportable income.

Savings Bonds are exempt from state and local income taxes. Unfortunately, they are subject to any and all federal, estate, excise, and gift taxes as well as to state estate and/or inheritance taxes.

Read more about bond taxes before redeeming any savings bonds or use Subscription Service for monthly Bond Statements and Alerts, along with 24/7 access to your personalized Bond Inventory Report.

When Must I Report The Taxes On Savings Bonds?

You can defer reporting the interest income (earnings) on a bond for these three reasons – whichever occurs first:

  1. Until it reaches final maturity (normally 30 years from the issue date).
  2. You give up ownership of the bond, and then the bond is reissued.*
  3. When it is cashed in (redeemed).

* If you give up ownership of the bond and the bond is reissued to someone else, you will need to report the interest earnings up to date you owned the bond.

To obtain cash in values, learn final maturity dates and the total amount of interest earned on series E, EE and I savings bonds, use the complimentary calculator. Included is a color-coded, printable, Bond Inventory Report with a “what this means to you” explanation.

How Should Interest Income From Bonds Be Reported On My Tax Return?

  • Interest earned from savings bonds should be reported on the same line with other interest income on a Federal Income Tax Return.
  • Depending upon other income and factors, you may, or may not, owe any income taxes at all (see annual interest reporting below).
  • Contrary to what many investors believe, savings bonds do NOT have a special tax rate.

Note: If you are reporting the interest earnings on bonds another person owns (i.e. your child’s bonds), report that interest on the other person’s Federal Income Tax Return along with other interest income they are reporting.


What Tax Forms Should I Receive After Cashing In Bonds?

The bank or redeeming institution will issue a paper 1099-INT either on the spot or mailed to you in the first few months following the year the bond was redeemed. Interest income information will also be supplied to the Internal Revenue Service.

For electronic bonds, investors must print out the 1099-INT from their Treasury Direct Account.

Paper 1099-INT statements will not be mailed for paper bonds that were converted to electronic bonds.

To learn bond values and the total interest earned amounts, use our complimentary savings bond calculator.

How Can I Avoid Having To Report A Large Amount Of Interest Income In Any Given Year?

Bond owners who want to avoid having to report a large amount of interest income in any given year should consider the “annual interest reporting method,” which requires annual reporting of the interest income generated from savings bonds before they are redeemed or reach final maturity.

How the annual interest reporting method works:

  • You can elect to report ALL of the interest earned to date on your Federal Income Tax Return before you redeem the bond(s).
  • Once this election is chosen, you must report the annual interest earned amounts for all your bonds, (including any new bond purchases) each year thereafter on your tax returns.
  • Keep copies of applicable tax returns as proof of all prior annual interest reporting.
  • When you redeem the bonds, you will receive a 1099-INT for ALL of the interest earned – regardless of what was previously reported.
  • The government doesn’t track annual interest reporting.
  • Advise any co-owners, beneficiaries, heirs and financial or tax planners of the annual interest reporting, to avoid a double taxation issue.

Can Savings Bonds Be Tax-Free If Used To Pay For My Child’s College Education?

Recent tax law changes may affect the tax-free bonds for education rulings. Be certain to check the latest tax law changes as well as with the IRS or a financial and/or tax professional regarding the tax-free bonds for education status before filing.

  • Savings bonds issued after December 31, 1989, may be eligible for the “Tax-Free Education Bond Program.”
  • The program allows owners of series EE and I Savings Bonds to gain full, or partial, federal tax-free status for bonds used for funding a child’s education.
  • Grandparents cannot take advantage of this feature.
  • There are several criteria that must be met to qualify for the tax-free education program.
  • Always review tax-free amounts with a licensed financial or tax professional regarding tax-free education bonds before filing.
  • For updated rules and regulations associated with this program, visit our Education page.

About is an online financial bond management company providing essential U.S. Savings Bond information since 1992. For over 26 years, bond experts have created various consumer programs, tools and services not offered elsewhere, including an online complimentary savings bond calculator, providing cash in values with important financial information presented on a personalized, color-coded Savings Bond Inventory Report. Unique savings bond management services include signature monthly summary emailed Savings Bond Statements, which help bond owners maximize their investment, avoid losing money and paying unnecessary taxes.

Last Updated: February 21, 2019

About the author

Jackie Brahney is the Marketing and Editorial Director and most notably, an U.S. Savings Bond Expert for Since 1991, she has done extensive research on savings bonds and state of the art savings bond valuation systems, and heads the company's public relations and marketing initiatives.


  1. I cashed in savings bonds that were a seriesE purchased in 1985. On the 1009 forms the bank put the total that the bonds were cashed in for not the total amount of interest of the bonds, I’ve called the IRS and no one seems to know what taxes are due.

    1. Hi Patricia –

      We’d recommend you contact Treasury Direct at 844-284-2676. There will be a menu. Select option #2. This will bring you to another menu. Press option #1. A live representative will answer.

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