During the month of December, Savings Bond investors can obtain financial information to take advantage of beneficial tax reporting options, as well as avoid potential headaches at tax time.
Few bond owners are aware that they have the option to report the interest earned annually on their savings bonds. Total interest earned amounts for the year are indicated in December.
Choosing to report interest annually may result in reducing or possibly not owing any federal income taxes when cashing in.
For those that are – or about to be on – a fixed income, annual savings bond interest reporting could be a very smart decision.
Parents may also want consider reporting interest annually on their child’s tax return, when income is likely to be limited.
Most bond owners don’t take advantage of the annual interest reporting option because it used to be too confusing to determine the (annual) amounts, which often requiring assistance from a financial or tax professional.
Annual interest amounts can now easily be determined simply by reviewing an emailed Savings Bond Statement each December.
Once you choose to report interest earned annually on savings bonds, you must continue to do so for all the bonds you own, and any new bond purchases.
When redeeming bonds, all of the interest income earned needs to be reported on a Federal Income Tax Return (unless interest was previously reported). If there is a large amount of interest, it could adversely affect social security benefits.
When cashing in (paper) bonds, the difference between the purchase price and the cash-in value is considered report-able interest income.
Any interest earned amounts over $10 will result in the issuance of a 1099-INT either on the spot or mailed in the first few months of the following year after redemption. This amount should be included on ones Federal Income Tax return in the year the bond was redeemed.
Luckily for bond owners, online calculators, bond management and SavingsBonds.com‘s Cash-In Reports©, indicate annual interest earned amounts each December. Additionally, bond owners can also review a list of redeemed bonds for that year and learn the amount of interest income they will eventually have report at tax time.
SavingsBonds.com’s complimentary Calculator provides current values, interest rates, financial, timing and tax information via a color-coded, Savings Bond Inventory Report© including a “what this means to you” explanation. For savings bond management services & updated values via monthly e-Bond Statements with important alerts, sign up for a free 14 day trial of SavingsBonds.com’s unique VIP Membership.