US Savings Bonds

Archive for September, 2006

Question: Did Bank of America discontinue its Savings Bond VISA?

I don’t seem to be getting my savings bond points any more!
(I tried calling customer service but I waited 30 minutes on hold before hanging up.)

Answer: Gosh, thats what really suck about large banks. Its takes forever to get a hold of a real person!!

I love our small bank!

Sorry I just wanted to rant, I don’t know the answer to that.

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Question: Cashed Savings Bonds taxed as income if I used it for tuition?

In May 2006 I cashed in about $950 worth of Savings Bonds some family gave me when I was young (27-30 years ago).

I took this money and put it in my checking account and immediately used the proceeds (and then some…) to pay off my outstanding college tuition bill.

Do I need to pay income taxes on this amount? Because the bank sent me an income statement for the $950 and the school has sent me nothing. I know that higher education tuition is normally tax deductible for an unlimited number of years, which is different than when I first started college.

Thanks!

Answer: You will have to pay the interest on the Savings Bonds because you can not exclude them for FEDERAL taxes because you were under 24 when they were issued to you. However, you can write off some of the school expenses (tuition and fees) with either a Hope Credit, Lifetime Learning Credit, or Tuition and Fees Deduction.

You should not report the bond interest on your state tax return.

DISCOVERY EDUCATION AND 3M ANNOUNCE NATIONAL SCIENCE WINNER

This section of US Savings Bonds website discusses tax consequences on Savings Bonds. We start with tax consequences on Series EE US Savings Bonds and Series E US Savings Bonds. 

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Tax Consequences on Series EE US Savings Bonds

What is taxable income for US Savings Bonds?

Any increase above the purchase price of a series EE US savings bond or a series E US saving bond is interest. These earnings of US Savings Bonds are subject to Federal taxes, but are exempt from State and local income taxes. 

When can I postpone reporting income on series EE US Savings Bonds or a series E US Saving Bonds?

You can postpone reporting the series EE US savings bond or a series E US saving bond ’s accumulated interest for Federal income tax purposes until you redeem the series EE US savings bond or a series E US saving bond or the series EE US savings bond or a series E US saving bond stops earning interest 30 years from issue (40 years if the issue date is before 12/1965). 

When series EE US Savings Bonds or a series E US Saving Bonds stop earning interest, series EE US Savings Bonds or a series E US Saving Bonds are automatically redeemed and the interest earned is reported for Federal income tax purposes. 

Series EE US Savings Bonds Tax reporting

If you do nothing, your series EE US savings bond or a series E US saving bond interest is deferred for Federal income tax purposes. This is called “cash basis” reporting. You may also choose to report interest of your series EE Us Savings Bonds or a series E US Saving Bonds for Federal income tax purposes each year as it accrues (“accrual basis”). Accrual based reporting of series EE Us Savings Bonds or a series E US Saving Bonds may be advantageous, for example, for series EE Us Savings Bonds or a series E US Saving Bonds in a child’s name. 

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What are the tax consequences on Series EE Savings Bonds? When are Series EE Savings Bonds taxed?

When holding a Series EE Savings Bond, the following tax consequences on Us Savings Bonds apply. The interest on US Series EE Savings Bonds is not taxable until the earlier of: 

In another word, there is no tax consequences on US Series EE Savings Bonds until one of the above events occur.