What is deferred interest on Series H Savings Bond?

Tuesday, July 13th, 2004
Categorized as: Series HH or H US Savings Bonds

I inherited two Series H Bonds back in 1995; one for $5,000 and one for $10,000. I am considering cashing in the $10,000 H bond. I am currently getting an interest payment twice a year. What is this ‘interest deferred’ on the front of the bond? What does it mean? I guess my real question is – since I inherited this, I don’t know if taxes have been paid on it or not. If I cash this, will that basically be adding $10,000 to my W-2 income earned, or is it only on the interest earned? I’ve been getting the 1099 tax form and been reporting the interest received for some time now, but I guess I’m unclear what ramifications will ensue if I cash this now.

Tom’s Response

If you cash the $10,000 H bond, you’ll receive $10,000 in cash and a 1099-INT for the amount of deferred interest shown on the front of the bond.

Here’s the background – the person you inherited the H bond from once had Series E or EE Savings Bonds. The interest earned on these was added to the value of the bond and the income tax on the interest was deferred. At some point the Series E/EE bond was converted to a Series H bond.

This conversion allowed the tax deferrment on the interest earned up to that point to continue, but from then on the interest was paid in cash semiannually. When you inherited the bond, you not only got the value of the bond, you also got the obligation to pay the income tax on the embedded interest that had never been paid.

This page on federal income tax brackets will help you decide how much to hold back for taxes if you decide to cash the bond.

Rate this post (1 to 5 stars):  1 Star2 Stars3 Stars4 Stars5 Stars
(Average rating: 4.60 stars)

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:


On July 11th, 2007 Steve said:

Does anyone know if you can roll series EE bonds to a 529 plan and forego having to pay tax on the interest received on the bond if you use the money in the 529 for college expenses?

On July 12th, 2007 Tom Adams said:

Steve – the information you’re looking for is on our page about the Savings Bond education deduction.

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

Savings Bond Calculator


Savings Bond

Get an answer to your questions from the Treasury's Savings Bonds team.

Click below to ask a question.

Ask the Treasury


Invest online in Savings Bonds or
marketable Treasury securities.

Deal directly with the U.S. Treasury.

More info


Log in