Tax Consequences on Savings Bonds

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.

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.

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.