What happens to the interest earned on United States Series EE savings bonds?
The accrued interest on Series EE bonds is subject to federal income tax. It is not subject to state income tax. EE Bonds don't make interest payments, instead, the accrued interest is reflected in the redemption value of the bond.
The only savings bonds that still earn interest are I bonds and some EE and HH bonds. For those, you must look at the issue date. EE and I bonds earn interest for 30 years from the issue date.
Series EE and Series I bonds no longer earn interest when they reach maturity 30 years from the date of issuance. If you have any bonds older than 30 years, we recommend cashing them in immediately because they are no longer earning interest.
Current Rate: 2.70%
(But if you cash before 5 years, you lose 3 months of interest.) (Note: Older EE bonds may be different from ones we sell today.)
Interest from EE U.S. savings bonds is taxed at the federal level but not at the state or local levels for income. The interest that savings bonds earn is the amount that a bond can be redeemed for above its face value or original purchase price.
While the Treasury will not penalize you for holding a U.S. Savings Bond past its date of maturity, the Internal Revenue Service will. Interest accumulated over the life of a U.S. Savings Bond must be reported on your 1040 form for the tax year in which you redeem the bond or it reaches final maturity.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it's a good idea to cash them in because you won't get any extra benefit.
We guarantee that the value of your new EE bond at 20 years will be double what you paid for it. (If you have an EE bond from before May 2005, it may be earning interest at a variable rate. See more at EE bonds.) We guarantee that the interest rate of an I bond will never fall below zero.
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
You can get your cash for an EE or I savings bond any time after you have owned it for 1 year. However, the longer you hold the bond, the more it earns for you (for up to 30 years for an EE or I bond). Also, if you cash in the bond in less than 5 years, you lose the last 3 months of interest.
How do I cash out my EE savings bonds?
The only option for cashing electronic savings bonds is by logging in to your TreasuryDirect account online. If you have paper savings bonds, you can fill out the appropriate form and mail it and the bonds you want to cash to the Treasury Retail Securities Services — the address is listed on FS Form 1522.
The bond continues to accrue interest even after reaching its face value, but at “final maturity” (after 30 years) interest stops accruing and must be reported. Note: Interest on EE bonds isn't subject to state income tax.
I bonds offer an inflation-protected return, ensuring your savings keep pace with rising costs. EE bonds, on the other hand, provide a fixed-interest rate for the life of the bond, offering a predictable return.
How long should I wait to cash in a savings bond? It's a good idea to hang on to your bond for as long as possible, ideally until it matures, so you can take full advantage of compound and accrued interest.
You can redeem a savings bond online at the Treasury Department's TreasuryDirect website, by mail or at your local bank or credit union, if they offer the service. Your savings bond must be at least a year old, and you'll need government-issued identification to prove that the bond is yours.
Interest income from Treasury bills, notes and bonds - This interest is subject to federal income tax, but is exempt from all state and local income taxes.
Report interest on U.S. Savings Bonds on Form 1099-INT. Also, report OID on obligations with a term of 1 year or less on Form 1099-INT. Reporting interest and OID. If you are reporting qualified stated interest and OID on an obligation, you may report both the interest and the OID on Form 1099-OID.
If you cashed series EE or I U.S. savings bonds this year that were issued after 1989, you may be able to exclude from your income part or all of the interest on those bonds. Use Form 8815 to figure the amount of any interest you may exclude.
You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.
You may be able to cash in paper EE bonds at a bank where you have an account or through TreasuryDirect. Ask your bank about its process for cashing savings bonds. Ask your bank how much it will cash at one time. Determine the identification or other documents you will need.
Can you cash EE savings bonds at a bank?
Banks and credit unions can redeem savings bonds over the counter.
All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.
Series EE bonds are considered ultra-safe, low-risk investments, whose interest is typically exempt from state and local taxes. However, they are subject to federal taxes, but only in the year in which the bond matures or is redeemed.
Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity. Series I bonds are sold at face value and mature after 30 years. Interest is added monthly to the bond's value.
If you buy an EE bond now, we guarantee that in 20 years it will be worth at least twice what you paid for it. (This is true for any EE bond bought as far back as June 2003.)
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