If you have redeemed or are holding any U.S. Savings Bonds that have reached final maturity in 2016, read this:
Paper Savings Bonds: If you redeemed bonds in 2016, you should have received a 1099-INT for all of the interest earned either on the spot (at the bank or financial institution), or mailed to you early in 2017. Contact the financial institution where you redeemed the bonds if you have not received the form. If you mailed in bonds to the Treasury Department for redemption and haven’t received the 1099-INT, call 844-284-2676.
Electronic Savings Bonds: Print out the 1099-INT from your Treasury Direct Account for bonds redeemed in 2016. This includes any paper bonds that were converted to electronic format. Paper 1099-INT’s will NOT be mailed for e-bond redemptions.
According to the IRS when a savings bond reaches final maturity – regardless if the bond has been cashed in – the owner is required to report all of the interest earned (unless previously reported annually) on a Federal Income Tax Return for that year.
Matured paper savings bonds do NOT automatically receive a 1099-INT. When electronic bonds reach final maturity, the owner is notified of the automatic bond sale and they must print out the 1099-INT from their Treasury Direct Account.
- Failure to report the interest income could result in IRS fines and penalties, depending on final maturity date, and the amount of interest earned.
- If the bonds are well beyond their final maturity dates, and you have not reported the interest, you may be able to file amended tax returns.
- Consult with a financial or tax professional regarding rules and regulations. Refer to IRS Publication 550.
U.S. Savings Bonds are subject to Federal Income Tax and free from state and local income taxes.
- The difference between the purchase price and redemption value of a savings bond is considered report-able interest.
- There is no special tax rate for savings bonds.
- Savings bond interest earned amounts should be reported as “ordinary income” on one’s Tax Return in the year the bond was redeemed or reaches final maturity, whichever occurs first.
- Regardless of any previous tax reporting, the 1099-INT will include ALL of interest earned since the bonds issuance.
- If you reported interest annually in the past, include copies of all applicable prior Federal Income Tax Returns, indicating the amount of interest previously reported.
Received bonds as a gift or an inheritance? Determine if any interest was previously reported. While reporting interest annually is not a common practice, you (or your heirs) can avoid double taxation. Keep copies of all applicable prior tax returns and consider alerting any co-owners, beneficiaries and heirs about any previously reported interest.
If you have previously reported interest from savings bonds in your or your child’s name, refer to IRS Publication 550 and consult with a tax professional regarding interest reporting requirements.
Understanding interest earned amounts, final maturity dates and the potential tax implications before redeeming will allow for better financial planning. Use an online complimentary savings bond calculator to obtain exact bond values, interest earned amounts and maturity dates.
Investors often forget about bonds that they redeemed earlier in the year. Additionally, bonds can be worth a lot more than their face value, which is often a pleasant surprise when cashing in. However, having to report a large amount of interest income in any given year can create an unpleasant tax situation, especially for those in a lower-income tax bracket. Once a savings bond has been cashed in, there is no going back.
SavingsBonds.com’s 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©