Do The New Dismal Savings Bond Interest Rates Affect Older Bonds?

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The new U.S. Savings Bond interest rates effective May 2017 through October 2017, apply to NEW savings bond purchases only.

Series EE Savings Bonds purchased from May through October, 2017 will earn a dismal 0.10% for the next 20 years. That rate remained unchanged from the prior 6 month period.

The Series I Savings Bond rate dropped, now earning a meager 1.96% (down 0.80% from the prior 6 months) Unfortunately, the fixed rate portion of the I Bond will remain at zero percent. The variable rate is currently set at 1.96%. Depending on  financial market conditions, the variable rate may change after November 1, 2017.

Those owning older savings bonds shouldn’t panic. These new rates are not likely the rates that their bonds are earning. Keep in mind a June 2000 Series I bond is currently earning over 6%.

Confused? Use an online bond calculator  to quickly determine the interest rate for every (paper) savings bond you own.

Savings bond interest rates are determined based on when a bond was purchased and the series (ex: EE or I).  Various interest rates, formulae, rules and regulations have been implemented since savings bonds were issued in 1935.

Those holding older bonds should keep in mind, the rates announced every 6 months are combined with all the prior years interest rates to create the new overall yield.

Savings Bonds do not all perform the same.

Series EE Bonds purchased May 2005, and after, earn a fixed rate of interest for the first 20 years. The rates are currently based on 10-year Treasury note yields. It is also adjusted for features unique to savings bonds, such as the tax deferral feature and redemption option.

Series I Bonds are composed of a fixed rate – which remains the same for the life of the bond – along with an inflation rate. The government sets the inflation rate every six months (May and November), based on changes in the adjusted Consumer Price Index for all Urban Consumers (CPI-U).

Even in times of deflation, bonds may not earn any interest for a specific period, but they will never actually lose money. Savings bonds are guaranteed and backed by the full faith and credit of the government.

To receive monthly e-bond statements that will help eliminate stress and any interest rate performance guesswork, consider using a bond management service .

The good news is that interest rates are starting to rise. Interest rates for savings bonds will likely follow. Always check your interest rates before cashing in any bond !

About SavingsBonds.com:

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.©

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Frequently Asked Savings Bond Tax Questions

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Q: What Taxes Will I Owe When Cashing In Savings Bonds?
A: Savings Bonds are exempt from state and local income taxes. They are subject to Federal Income and estate taxes.

Q: When Do I Have To Report The Taxes On Savings Bonds?
A: You can defer reporting the interest income (earnings) on savings bonds until the bond reaches its final maturity (normally 30 years from the issue date) OR when you cash it in – whichever occurs first.

Q: How Should I Report The Interest Income From Savings Bonds On My Tax Return?
A: You should report the interest earned from bonds on the same line with other interest income on your Federal Income Tax Return. Depending upon all the other factors concerning your tax return, you may, or may not, owe any income taxes at all! 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.

Q: What Tax Forms Should I Receive After Cashing In Savings Bonds?
A: The bank or redeeming institution will issue a paper 1099-INT – either on the spot or it will be mailed to you in the first few months following the year the PAPER bond was redeemed.  This interest income information will also be supplied to the Internal Revenue Service. To learn more about paper savings bonds and the total interest earned, go to SavingsBonds.com’s complimentary calculator.

Note: For Electronic bonds, YOU must print out the 1099-INT from your Treasury Direct Account. Paper 1099-INT statements will NOT be mailed for paper bonds that were converted to electronic bonds or newly purchased e-bonds.

Q: How Can I Avoid Having To Report A Large Amount Of Interest Income In Any Given Year?
A: 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 good records as proof of all of the annual interest reporting. When you redeem 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.

Q: Can Savings Bonds Be Tax Free If Used To Pay For My Child’s College Education?
A: 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. For rules and regulations associated with this program, speak to a financial and/or tax professional, the Internal Revenue Service, and visit SavingsBonds.com Education page.

About SavingsBonds.com:

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.©

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Top 5 Savings Bond Tax Benefits

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Despite dismal interest rates for new U.S. Savings Bond purchases, some favorable tax advantages continue to make bonds an attractive investment, especially for those owning older paper versions.  Here’s why:

1. No State Or Local Taxes.
U.S. Savings Bonds are free from state and local taxes, however, they are subject to federal income and estate taxes under most circumstances.

2. Deferment Of Reporting Interest Income Until Redemption Or Upon Reaching Final Maturity.

Investors are not required to report interest earned amounts until the bond is redeemed or reaches final maturity (see below), whichever occurs first.

  • When redeeming paper bonds, a 1099-INT will be issued for ALL of the interest earned (regardless of any previous interest reporting), either on the spot or mailed within the first few months of the following year.
  • According to the IRS, when a savings bond reaches its final maturity, the interest earned amount should be included (unless previously reported) on a Federal Income Tax Return, even if the bond has NOT been redeemed.
  • Most Series EE and I Bonds will reach final maturity in 30 years from the issue date.
  • Paper savings bonds are NOT automatically redeemed when they reach final maturity.
  • When electronic bonds reach final maturity, they are automatically redeemed and the investor will need to print out the 1099-INT from their Treasury Direct Account.
  • Paper 1099-INT’s are not mailed for e-bonds.

3. Ability To Report Interest Earnings Annually.
This lesser known, or practiced, financial option allows individuals to report annual interest earnings prior to redemption or final maturity. By choosing to report annually, when bonds are redeemed (or reach final maturity) investors can avoid having to report a (potentially) large amount of interest in any given year(s).B

  • Beneficial to individuals in limited income brackets.
  • Once interest is reported annually, you must continue reporting interest earning every year thereafter for all existing bonds, as well as for any new bonds purchased.
  • Upon redemption the 1099-INT will include ALL of the interest earned for the bond, regardless of any previously reported amounts.
  • Keep copies of all prior Federal Income Tax Returns which include savings bond interest earned amounts as proof of prior reporting.

Savingsbond.com’s VIP Membership provides annual interest earned amounts for easy, stress free interest reporting.

4. Savings Bond Earnings Are Exempt From Federal Income Taxes When Used For Qualified Higher Education Expenses.
Bonds purchased from 1989 and after apply and did not have to be earmarked for the Education Tax Exclusion at the time of purchase.

  • The full tax exclusion is also available to single taxpayers and married persons filing jointly with specific annual income amounts.
  • Seven criteria that must be met and further details can be found at The Savings Bond Education Tax Exclusion Program.

5. Series EE or I Bonds Purchased In A Child’s Name.

If paper bonds were issued in a child’s name and if the child is still a dependent at redemption, you may be able to pay taxes on the interest earnings at the child’s rate. In certain cases, the child’s rate could be 0% depending on annual income limits set by the IRS.

Since January 2012, only electronic bonds are being “sold” via a Treasury Direct Account. According to the Treasury Department, “Minors may not open an online account, buy bonds, or conduct other transactions. An adult custodian, such as a parent, may open an online account for the minor that is linked to the adult’s online account. The adult can buy securities and conduct other transactions for the minor, and hold the securities in the minor linked accounts.”

Paper bonds are still available using tax refund monies and submitting proper government forms along with ones Federal Income Tax Return.

Before turning your nose up on U.S. Savings Bonds, consider that the generally low returns (although Series I Bonds, issued in May 2000,* are currently earning 6.41%) can often be offset by many favorable tax advantages.  If you own old older savings bonds, it would be smart to learn the bond values and current interest rate performance via a no obligation, complimentary savings bond calculator.  Interest rates may be a lot higher than you think and the tax benefits could make savings bonds a very smart investment.

*Rate applies to Series I Savings Bonds issued in May 2000 during the month of March, 2017.  Interest rates are likely to change.

About SavingsBonds.com:

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©

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Redeemed Savings Bonds In 2016 Or Holding Older Bonds? Read This Before Filing Your Taxes

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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.

About SavingsBonds.com:

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©

By Jackie Brahney, SavingsBonds.com, http://www.SavingsBonds.com jbrahney@savingsbonds.com @savingsbondsgal

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Three Things Every Savings Bond Owner Needs To Know

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Millions of U.S. Savings Bonds are tucked away in closets, drawers and safety deposit boxes and forgotten about.

Many bond owners have no idea what their bonds are worth or how to properly manage them despite the availability of online calculators and bond management services.

Here are three things every savings bond owner should know to maximize their investment and avoid common, costly mistakes.

1. Savings Bonds Are Not Created Equal.

Various series of bonds, such as A-D, E, EE, I, H and HH have been sold since 1935. The series, month and year of issue will determine the rules, regulations, interest rates, maturity dates and investment performance for that bond.

When interest rates are announced each May and November, those rates only apply to new bond purchases during that six-month period. That is not usually the rate older, previously issued bonds are earning. Sounds confusing?  It is for most.

2. Paper EE Bonds Can Be Worth A Lot More Than The Amount Printed On Them.

When a paper bond has reached face value – the dollar amount printed on the bond – it has reached its initial maturity.  They will continue to earn interest beyond their face value until they reach final maturity, which is usually 30 years from the issue date.

Once a bond reaches final maturity it will no longer earn any interest. Holding onto matured bonds is like giving Uncle Sam an interest free loan.

Since January 2012, savings bonds have been sold at face value, in electronic format only. The only way to obtain a (Series I) paper bond is via a Federal Income Tax refund.

Misunderstanding bond values often results in redeeming too many bonds when needing to raise cash. Investors also arbitrarily grab bonds from the bottom of the pile. They often mistakenly cash in the highest interest rate performers and hold onto the worst performers in their portfolio.

3. Cashing In Savings Bonds Creates A Taxable Event. The difference between the purchase price and cash-in value is considered report-able interest, which must be included on a Federal Income Tax Return.

Redeeming a substantial number of bonds that have earned a lot of interest in any given year could also create unpleasant tax surprises, especially for those on social security.

When redeeming, interest earned amounts over $10 will be reported on a 1099-INT, which will be either issued on the spot or mailed (in the first few months of the following year) by the financial institution that cashed in the bond(s). Electronic bond owners must go to their Treasury Direct Account and print out the 1099-INT.

IRS rules indicate that the total interest earned amounts on any savings bonds that have reached final maturity – even if they have not been cashed in  – should be reported on ones Federal Income Tax Return, in the year the bond(s) reached final maturity.

Savings Bonds Are Confusing. They should be taken out of storage, valued and properly managed.

A complimentary savings bond calculator which includes a detailed Bond Inventory Report©, provides cash in values, interest rate performance, total interest earned amounts, maturity and tax information for paper E, EE and I Savings Bonds. An easy to understand, ‘what this means to you,’ explanation helps investors make smart financial decisions about their bonds. Once educated, investors can confidently choose the best (lower interest earning) bonds to redeem first, and hold onto the better performers.

Whether holding or redeeming bonds, having basic financial information can help investors maximize their investment, avoid losing money and prevent unfavorable tax situations.

About SavingsBonds.com:

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©.

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Why You Should Do A Financial Check Up On Your Savings Bonds

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Most investor have no idea what their U.S. Savings Bonds are worth or the interest rates they are earning.  If you own savings bonds, pull them out of your drawers or safety deposit boxes and use a complimentary online calculator and do a financial check up. Here’s why:

Savings Bonds Do Not All Perform The Same

Since 1935, various savings bonds have been sold including A-D, E, EE, I, H and HH. The series, month and year of issue determines the rules, interest rates and regulations applicable to each bond.

SavingsBonds.com’s complimentary calculator, provides current cash in values, along with a detailed, bond-by–bond, color-coded, personalized SavingsBonds.com Savings Bond Inventory Report and a “What This Means To You” explanation.

In addition to bond values, an Inventory Report indicates current interest rates along with pertinent maturity and taxation issues for each bond. Important information needed to make educated investment decisions.

Whether you plan to hold onto some or all of your bonds, creating an online savings bond portfolio or becoming a SavingsBonds.com VIP Member can help you better organize, manage and understand what your bonds are worth and how they are performing.

Additionally, a VIP Membership provides monthly summary emailed Savings Bond Statements that provide current cash in values, monthly growth, taxation issues, and up to 3 month in advance “Alerts.”

“Alerts” notify investors about bonds that are, or about to, reach final maturity and will no longer earn any interest.

 A Savings Bond Statement is essentially a quick, one page snapshot of the bond portfolio values, along with important fianncial details giving investors peace of mind, just by opening monthly emails.

The SavingsBonds.com Cash-In Report eliminates guesswork and provides important taxation issues when needing to cash-in some or all of the bonds. Total interest income amounts are provided, which should be included on a Federal Tax Return, if any bonds are redeemed.

Optional Daily Bond Tips to further educate and even entertain are also provided.

To get started, first time users should go to SavingsBonds.com calculator and enter the series, denomination and issue date found on the front of each series E, EE and I savings bond to create the complimentary bond portfolio and printable, SavingsBonds.com Savings Bond Inventory Report. For ongoing savings bond management and 24/7 access to reports and monthly Bond Statements, sign up for the SavingsBonds.com VIP Membership for as little as $5.95 per year.

By Jackie Brahney, jbrahney@savingsbonds.com, @savingsbondsgal

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Money Resolution: Skip Starbucks For $1,000 Worth Of Savings Bonds 

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Standing in line on my last visit to Starbucks© my new years resolution light bulb went off. Like millions of others, mine included the typical list of losing weight, incorporating regular gym visits and trying to save more money.

It was probably the jolt of caffeine from the vanilla grande latte that helped me realize that I could stash away at least a $1,000 worth of U.S. Savings Bonds by giving up my regular visits to Starbucks©.

With my new plan I could still enjoy my favorite coffee and more importantly, satisfy my caffeine cravings.

However, after recently scrolling (and cringing) through waaay too many pages of my last credit card statement, saving more money seemed like a really important resolution to tackle. On the car ride home from my coffee run, I developed the plan.

I pulled out my old coffee maker, cleared a spot on my kitchen counter, and added my favorite coffee – including Starbucks© and flavored creams to my grocery list.

I did the math. By making my daily cup or two of joe at home, instead of purchasing them, I would save at least $25 a week. That would be enough to purchase a $100 savings bond every month.

Since I didn’t trust myself waiting a month to purchase a $100 bond (shoe sales are my financial kryptonite), I decided that purchasing a weekly $25 Series I Savings Bond (the minimum electronic purchase amount currently allowed) would be a smarter way for me to stay on track. I even accounted for weeks with birthdays, vacations and holidays when I likely would need some extra spending money and skip the bond purchase.  I

I wrote down 40 “buy bond” reminders on my calendar would result in $1,000 worth of savings bonds in 2015. That’s a lot of (coffee) beans!

The Series I Savings Bonds that I am scheduled to purchase will current earn 2.76% (the rate for new I bonds purchased through April, 2017), which is a lot more attractive than my current savings or checking account rates.

More importantly, purchasing savings bonds in small denominations would be a simple and nearly systematic way for me to save.

Putting the extra “coffee”  money in my checking or savings account would be too tempting to access, and likely sabotage my resolution plan. While I don’t plan to use the new savings, I can cash in the bonds after they have been held for at least twelve months (although a 3 month interest penalty applies for bonds redeemed in first 5 years).

With my new resolution, as an added bonus, I would also save some time and gas driving to purchase the coffee. If I really miss my favorite coffee joint, I could treat myself to a cup or two on the weekends, which happens to be on the way to the gym.

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.

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