Inheriting Savings Bonds

Wednesday, September 15th, 2004
Categorized as: Inheriting and bequeathing US Savings Bonds

When a son or daughter inherits Saving Bonds from their parent’s estate, do they pay taxes on the interest when they cash them in?

Tom’s response

Yes, typically income tax is paid when the bonds are redeemed.

However, it’s also possible for the income tax owed up to the date of your parent’s death to be paid on your parent’s final tax return (without cashing the bonds.) This makes sense if your parent’s tax rate on that final return is lower than yours.

If you go this route, it’s important that you have a copy of that final return so that when you cash the bonds you don’t pay the tax a second time. (The 1099-INT you will receive when you cash them will be for the entire amount of interest earned; you have to deduct the portion that has already been paid on your tax return).

My book has complete information on all the issues related to inheriting Savings Bonds.

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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:

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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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