How much should I hold back for taxes on my Savings Bond interest income?

Thursday, February 17th, 2005
Categorized as: Cashing in US Savings BondsSavings Bond taxes

I have some Savings Bonds reaching final maturity. I’d like to redeem them and reinvest in new Savings Bonds. How much of the interest income should I hold back for taxes rather than reinvesting?

Tom’s response

Good thinking! Many people forget to hold back part of the redemption proceeds for taxes. Then they don’t have any cash to the pay the tax they owe.

The percentage you’ll need to hold back depends on your filing status and taxable income. Taxable income is less than your total income. It’s your total income less deductions and exemptions. Look for a line on your tax return labeled Taxable Income (it’s line 42 on the standard 1040 form).

Look up your taxable income – using the column for the year you’ll cash the bonds – in the table for your filing status on our federal income tax brackets page. The percentage you need to hold back is on the right.

For other investments, you’d also need to add on a few percentage points for state income tax, but that’s not necessary here because Savings Bond interest isn’t taxable at the state level.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:

6 Comments

On March 31st, 2008 Billie Billyard said:

My mother died recently. My brother-in-law is the trustee. He has lied and has hidden assets. He denied knowing that my mother had set up a large Xerox trust fund. (His signature was on the origination papers.) He cleaned out her safty deposit box, which among other valubles, contained her savings bonds, which she bought regularly. He claims this box was empty except for $241. I know that he stole these savings bonds, and cashed them after my mother’s death. I need to prove that he did, so that I can ask the court for “Discovery”. Discovery will give me the right to ask banks for statements that will prove she had accounts that I know he is hiding. I found one of her bonds in a drawer. How can I find out who cashed these bonds and when they were cashed?
I would appreciate any help you could give me.
Thank you,
Billie Billyard

On April 1st, 2008 Tom Adams said:

Hi Billie – in the right column on this page there’s a place that says, “Ask the Treasury”. Click that and ask your question of the Savings Bond folks, who will let you know if they can help.

Tom Adams

On April 11th, 2008 marge said:

How much should I hold back for taxes on my Savings Bond interest income?

On April 11th, 2008 Tom Adams said:

Hi Marge – the information you’re looking for is at the top of this page. Is there something there you want clarified?

Tom Adams

On January 29th, 2010 Robin Root said:

If I cashed a $10,000 bond from my mother and recieved 12,147.10 for it, do i pay the on the $7,147 interest or the $2,147 interest above the face value of the bond?

On January 29th, 2010 Tom Adams said:

Robin – nice try, but you pay tax on the difference between the redemption value of the bond and what it cost to begin with – which was $5,000 – not its face value.

Tom Adams

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on Savings-Bond-Advisor.com. I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

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