When do Savings Bond taxes begin?
Tuesday, February 1st, 2005
Categorized as: Savings Bond taxes
I have some Series EE savings bonds that have reached initial maturity (12 years) but not final maturity (30 years). Do I now have to start paying taxes on the interest earned by the bonds?
There are only two situations in which you are required to pay income tax on the interest earned by savings bonds. The first is when you redeem them.
The second is when your bonds reach final maturity and stop paying interest. The tax is due at that time whether you redeem them or not.
Of course there’s no reason not to redeem them at that point, but many investors aren’t paying attention and end up both losing interest and having to pay the IRS a penalty for not reporting the interest when it was due.
It is also possible to pay the tax year-by-year, but this isn’t required unless you’re an accrual-basis taxpayer, which is very unusual.