Who pays the taxes

Tuesday, January 31st, 2006
Categorized as: Savings Bond taxes

If a Savings Bond has the social security number of the owner but is cashed by the co-owner, who is responsible for the income taxes on the interest?

Tom’s response

First, the social security number printed on the bond is only used for tracking purposes in case the bond is lost. It has no effect on taxes.

With E, EE, and I bonds, the 1099-INT tax form that reports income to the IRS will have the social security number of whoever cashes the bond. So if a co-owner cashes the bond, the co-owner will get the 1099-INT. (With H and HH bonds, however, the 1099-INT will have the SSN of the person who has been receiving the interest payments.)

Nonetheless, the IRS says the tax is owed by the person who put up the money for the Savings Bond. Here’s the relevant text from IRS Publication 550, Interest and Investment Income.

Co-owners. If a U.S. savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond.

One co-owner’s funds used. If you used your funds to buy the bond, you must pay the tax on the interest. This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Under these circumstances, since the other co-owner will receive a Form 1099-INT at the time of redemption, the other co-owner must provide you with another Form 1099-INT showing the amount of interest from the bond that is taxable to you. The co-owner who redeemed the bond is a nominee.

Nominee distributions. If you received a Form 1099-INT that includes an amount you received as a nominee for the real owner, report the full amount shown as interest on the Form 1099-INT on Part I, line 1 of Schedule 1 (Form 1040A) or Schedule B (Form 1040). Then, below a subtotal of all interest income listed, enter Nominee Distribution and the amount that actually belongs to someone else. Subtract that amount from the interest income subtotal. Enter the result on line 2 and also on line 8a of Form 1040A or 1040.

Both co-owners’ funds used. If you and the other co-owner each contribute part of the bond’s purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid.

Community property. If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. If you file separate returns, each of you generally must report one-half of the bond interest. For more information about community property, see Publication 555, Community Property.

Child as only owner. Interest on U.S. savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year.

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On January 31st, 2007 Nancy said:

I recently divorced and received a 1099 showing I have to pay taxes on $8,000 of interest on some bonds that transferred ownership as part of the marital settlement. I was wondering if I need to pay interest on bonds that had my ex-husbands name on the bond and an or listing my name after underneath. Which to me says we owned them jointly? Who should be paying the interest on these bonds? Can I delay paying the interest charge? P

On February 1st, 2007 Tom Adams said:

Nancy – Except in community property states, it’s possible to transfer ownership of Savings Bonds between spouses as part of a divorce without creating a taxable event.

Either you live in a community property state or the transfer was mishandled. I don’t know if it’s possible to go back and fix a mishandled transfer.

There’s no way to delay adding the interest to your income.

Tom Adams

On April 17th, 2007 Jim said:

I recently discovered some savings bonds that were titled in my mothers name (Party A) and my grandmothers name (Party B). I believe my grandmother put up the money to purchase the bonds. The names are separated by the word “or” not “POD”. Prior to discoving these bonds, my mother (Party A) passed away. However, my elderly grandmother (Party B) is still living… she’s turning 101 in a couple of days! At any rate, I am thinking about removing my mothers name and reissuing (registering) the bonds to show my grandmother as the first owner, and my name (Party C) as the new co-owner. None of the bonds have fully matured. Is this reissue considered a taxable event? if yes, who pays the taxes? I know we have the option of cashing the bonds right now (in my grandmothers name), but I do not want my grandmother to take a large tax hit or have the nursing home assume her remaining assets. For all practial purposes, this is her money, but I would rather cash the bonds under my name and pay the taxes myself.

Please advise the best way to handle this situation.

On April 17th, 2007 Tom Adams said:

Jim – The bonds legally belong to your grandmother. She can have the registration changed without tax consequences. There’s more info on this kind of change here.

Unfortunately, as the above article points out, if you cash the bonds, the IRS would still say it’s your grandmother who owes the taxes, not you.

Since her tax rate is almost certainly lower than yours, it’s not clear to me why you want to pay the taxes anyhow.

Unless she needs the money, she also has the option of just not cashing the bonds. If she changes the registration as you’ve outlined, you would inherit them if she dies first.

If you don’t change the registration, your grandmother’s will determines who gets the bonds if she dies.

Tom Adams

On November 16th, 2007 Ken Crovo said:

I am now retired. While working I purchased Series EE bonds as gifts for my grandchildren and registered them in my grandchild’s name and mine. I used my Social Security number as I did not have that information for my grandchild. My grandchildren are now coming of age where I am giving them the bonds on their 18th birthday or graduation from high school. How do I now get my grandchildren’s SSN on the bonds so that interest earned is not part of my income?

On November 17th, 2007 Tom Adams said:

Hi Ken – I assume you’re saying that on each bond you are a co-owner with a grandchild.

From a tax perspective, it is a mistake to make yourself a co-owner of a bond meant as a gift. As the text at the top of this page explains, since you put up the money for the bonds, the IRS considers you the principal owner of the bonds, even though your name is listed second. And the IRS wants the principal owner to pay the tax.

On the other hand, as a practical matter, when the bonds are cashed, the 1099-INT reporting the interest to the IRS will have the SSN of the person cashing the bond. The SSN printed on the bond isn’t used and there’s no way to change it anyhow. The Treasury won’t reissue a bond just to change the SSN.

There’s a disconnect between how the IRS wants Savings Bonds interest handled in terms of principal owners and how the Treasury tells banks to make out the 1099s.

Tom Adams

On February 9th, 2008 Jerry said:

Tom, my parents want to give me a ‘E’ savings bond issued in 1977 (now matured).  They want to avoid any tax implications.  The purchaser of the bond was my grandmother (maternal) who has been deceased for 2 years.  The Bond has the name in the To: section as my grandmother along with her old address/city/state/zip. Underneath the address it states Or and my mothers name.  Is there anyway that my parents/mother can give me the bond in order that they/she avoid any tax implication?  If so how?Thank you

On February 11th, 2008 Tom Adams said:

Hi Jerry – In short, no. Your mom has to pay the taxes. Since her tax rate is probably lower than yours anyhow, why not? But if it’s higher, it’s higher.

She will be tempted to hold on to it rather than tax it. This just compounds the problem, as now she’s giving an interest-free loan to the government and the taxes still have to paid.

Tom Adams

On February 18th, 2008 Dave Snouffer said:

I have a real quandry! Just got a phone call from a person who bought my grandparent’s house who found Series E Bonds in the basement. Sure enough, there were 9 bonds with a total face value of $2600. My grandfather had bought them for my mother and didn’t want his wife to know about them. They have “my mother’s name” or “my grandfather’s Name” on each of them. My grandfather died in 1981. My Grandmother died in 2004. And my mother died in 1995.

I’m my mother’s sole survivor and was trustee of her living trust, which was liquidated and ended in 1996, with the help of an attorney. All federal taxes were filed for her year of death and for the trust. I’m sure that no taxes were paid on the bond interest.

What do I do about taxes and the IRS Penalty. The final maturity dates range from 1996 to 2005, with all but two having the 40 year maximum. The two bought in 1966 and 1957 had 30 year maturities. The interest for the 9 totals $16,379.12. Obviously, I learned that the bonds are well past their maturity dates. In spite of this, will the IRS still penalize me? Or can I file an estate form in my mother’s name? It’s value was well below any taxable estate amount.

Or will I have to pay the full tax plus penalty since my name and SS# will be on the W-9 filed through the bank?

Thanks so much for any advice you can give me.

On February 19th, 2008 Tom Adams said:

Hi Dave – since the bonds aren’t legally yours, it would be hard for the IRS to argue that you should have paid the taxes in earlier years. I don’t see much chance of a penalty here.

Demonstrating to the Treasury that you’re the legal heir could be the bigger problem, particularly on the bonds that have only your grandfather’s name on them.

I suggest you use the links on this page to contact the Treasury and ask them how to proceed.

Tom Adams

On February 26th, 2008 tammi lynn nichols-parnell said:

my mother and father had a hand full of savings bonds my mother name was on some and fathers name were on some mother died in 1989 my father passed away in 1997 bonds were in his house in a box still in his house at the time of his death my father remarried 2 years after mother passed away in 1989 they are gone and have never been found the lady that he married took these bonds how would she have cashed these bonds if my mother and fathers name were on them? nothing in the will says that these were hers to take i have no searil numbers but these bonds were bought for me to go to collage on is there any way i can get my hands on them or find out if they have been cashed in
thank you mrs parnell

On February 27th, 2008 Tom Adams said:

Tammi Lynn – since the bonds belonged to your father and he remarried, his wife would have a stronger claim to the bonds than his child would. Sorry, but that’s how the law handles situations such as yours.

Tom Adams

On March 5th, 2008 shannon said:

I have a quick question….my parents bought my boys bonds with their names on them and my name as co owner…if I cash them will I pay the taxes on that? since my parents names were only on their to show where to mail it too….their names and social security numbers were not on there….

On March 5th, 2008 Sara said:

My husband at the time and I purchased series EE savings bonds by payroll deduction from my pay check. They are in my name “or” my former husband’s name. In the divorce decree the bonds are listed as belonging to ‘the child’. Based on what I’ve read here on this site, I’m thinking the answer to my question is that I claim the interest when cashed because they were purchased from my paycheck? Can they be transferred to my son’s name? If they would have been in my son’s name “or” my name, would the interest have been claimed by him and then offset by what he would be paying on a student loan?

On March 6th, 2008 Tom Adams said:

Shannon – the 1099-INT tax form will be issued in the Social Security Number of the person who cashes the bonds – you or your son. Because they gave the bonds to you, your parents aren’t responsible for the tax.

Sara – If you had changed the bonds to your son’s name at the time of the divorce, you would have had to pay the tax at that time and he would pay the tax since then. If you change the name now, you pay all the tax, just as if you cashed them now. Since cashing is a lot easier than changing the name, I suggest you just do that.

Tom Adams

On April 20th, 2008 Terry (Beeville) said:

I and my wife buy EE savings bonds for our boys every so often. We plan on giving them these bonds when they complete high school. They have to use these bonds for educational purposes, tuition, books etc. Will I or him have to pay taxes on these bonds if we use them solely for educational expenses? Their name is on the Bonds and my name as the father is listed as a co-owner.

Also, since they will have a lower income as a student, will their tax bracket rate be less than mine?

On April 21st, 2008 Tom Adams said:

Hi Terry – because of the way you’ve registered the bonds, these bonds aren’t eligible for the Savings Bond college education tax deduction.

The 1099-INT will be issued in the SSN of whoever cashes the bonds (boy or father). Typically students are in a lower income tax bracket than their parents and would pay less (sometimes even nothing) in taxes.

Tom Adams

On April 21st, 2008 Terry (Beeville) said:

Mr. Adams,

How should a person register savings bonds in a way that the bonds can be eligible for the Savings Bond tax deduction?

Thank you for youe advise.

On April 22nd, 2008 Tom Adams said:

Terry – there are handful of rules about how the bonds have to be registered; they are described on my Savings Bond college education tax deduction page. If you need more information, please ask on that page, not here.

Tom Adams

On June 29th, 2008 Ralph & Janet Brescia said:

Hello , My wife and I have EE bonds wherby we are alternately owner and co owners on all of the bonds. We would like to insure that our grown children can inherit, without probate, whatever bonds are left when we pass on. What do you suggest ? Also, isn’t there an IRS ruling that any EE bond value over $100,000 MUST be run through the probate process ? Thank you.

On June 30th, 2008 Tom Adams said:

Ralph – the main page on this site regarding this issue is here.

You’d probably also be interested in the page about estate planning.

Yes, if the redemption value is over $100,000 the bonds must go through probate. Also, whether the bonds go through probate or not, your heirs may owe estate taxes. Usually on the federal level this isn’t a problem, but depending on what state you live in, there can be a significant level of state estate taxes.

Tom Adams

On July 14th, 2008 Nora Bryant said:

Hi Tom,

I was divorced in 1986 & part of the divorce settlement was 35 EE savings bonds. They are in my ex-husband’s name with me listed under “POD”.

Is there anyway he can transfer those bonds to me? He is willing to do so. He is also willing to cash them in, give me the money & I will pay the income tax but his income is higher than mine plus I don’t know if it is wise to cash them all in at this time.
Thank you for any help you can give me.

Nora Bryant

On July 15th, 2008 Tom Adams said:

Nora – Savings Bonds can be transfered tax free between ex-spouses when their transfer is part of a divorce settlement. This post on splitting Savings Bonds after a divorce has more information than you probably need – concentrate on the last couple of paragraphs.

Tom Adams

On July 19th, 2008 Joe said:

My parents bought savings bonds in our names when we were kids. Now many years later, they’ve been divorced for about 20 years. These bonds “disappeared” for awhile, and were found a few years back. Neither mom or dad will give any info about the bonds, even thou they were bought for myself and my 3 brothers with college in mind.

My question is, do we as siblings have any right to these bonds? And where would we inquire of such?

On July 21st, 2008 Tom Adams said:

Joe – legally you have rights but as a practical matter you’d be better off being patient. If you just can’t, speak to a lawyer.

Tom Adams

On September 3rd, 2008 Tina said:

Can I purchase a EE savings bond and put the owner as a 1yr.old child, or do I have to put the child’s parent as co-owner?

On September 3rd, 2008 Tom Adams said:

Tina – You can use the child’s name – there’s more info here.

Tom Adams

On October 14th, 2008 BARBARA said:

My mother-in-law was recently placed in an assisted living facility. While going through some of her papers we found a old us bond that was issued in 1958. The problem is that it was given to my father-in-law as a payment years ago for some work he had done for this man. The bond has the man’s name and was not signed over to my father-in-law. My mother-in-law tried to find out who the bond belong to, but without a social security number she was not able to find the owner. We wanted to know if you could explain how my mother-in-law could cash in this bond, or even if she would be able to do so. It was given for work done, but as you know back in the time it was a different world. My father-in-law being a trusting person never figured he wouldn’t be able to cash this bond in. Any help on this matter would be greatly apprecitated.

On October 15th, 2008 Tom Adams said:

Hi Barbara – you family can’t cash the bond. The only thing you can do is turn the bond over to the lost property division of your state’s attorney general office. They may find the heirs of the owner, but those heirs will get the money, not your family.

Tom Adams

On February 4th, 2009 Bill said:

We have savings bonds in the name of my mother and our kids. Bonds are titled as “or”. Bonds were purchased and paid for by my mother. It appears that based on what I read my mother pays the taxes no matter who actually cashes the bonds. Does my mother’s death affect who pays the taxes or is the interest just included in her final tax return.

On February 5th, 2009 Tom Adams said:

Bill – if your mother has died, then the bonds are sole-owner bonds belonging to your kids and your mother is no longer responsible for the taxes.

However, it is technically possible to put the interest through the date of your mother’s death on her final return. If the bonds are valuable enough and your mother’s tax rate was low enough to make this worth considering, my book has the details on how to accomplish this.

Tom Adams

On February 5th, 2009 Sue said:

We have found paper EE savings bonds that my grandmother (deceased for 7 yrs) purchased for my son as gifts when he was young to later help pay for college. He is now 18 and going to college. The majority of these have my son’s name listed first and then “OR” my name.
1)Since we are co-owner, who lists them as an asset on financial forms?
2)Is the asset value the face value of the paper bond? or what is the value we should list?
3)When they are cashed who is responsible for taxes since neither of us purchased them?

On February 6th, 2009 Tom Adams said:

Sue – Your first question is a FAFSA question, not a Savings Bond question, and I don’t know the answer. You’ll have to ask a FAFSA expert.

You can determine the value of the bonds using the Savings Bond Calculator you’ll find at the top of this page, on the right.

The person who cashes the bonds – you or your son – will be responsible for the taxes. Assuming his tax rate is lower than yours, he should cash them. Because of the way they are registered, they’re not eligible for the Savings Bond education deduction.

Tom Adams

On June 29th, 2009 Angie Riquier said:

I am the attorney-in-fact for my aunt who is in need of applying for medicaid. She has several bonds with her name and social “or” my son’s name. Are these part of her assets when applying for medicaid? She also has given bonds to my niece which are made out the same way. If they are her assets do I have to ask for them back for medicaid purposes. ( This could be tricky) Can I give my son the bonds that my aunt has? Can he wait and cash them in after her death? Thanks

On June 29th, 2009 Tom Adams said:

Angie – When anyone applies for Medicaid, the Social Security Administration routinely checks with the Treasury to see if that person owns any Savings Bonds or other Treasury securities. Whether they find any depends on the Social Security Number on the bond.

In your aunt’s case, the bonds have your aunt’s SSN on them. So your aunt will be expected to cash them, hold back what she needs for taxes (her income may be so low this won’t be an issue) and spend what’s left on her health needs before Medicaid will kick in.

Tom Adams

On September 10th, 2009 lynn said:

My mother who is 74 wants to reissue EE saving bonds to me. Her name is on the bond and I am listed as the POD. I believe she would be required to pay taxes on the bonds, but what happens when I cashed them? Also, since she is 74 is there a one time tax break for the interest.


On September 10th, 2009 Tom Adams said:

Lynn – If your mother has the bond reissued to you, she will receive a 1099-INT reporting the interest earned at the time of the transfer.

When you cash the bonds, you will receive a 1099-INT reporting all the interest the bonds have ever earned – including the portion your mother has already paid tax on. The IRS doesn’t expect you to pay the tax a second time, but you do have to show that some of the tax has already been paid. In my book I call this the Double Taxation Trap.

Given that your mother probably has a lower tax rate than you do, I recommend that she cash the bond, pay the taxes at her low rate, and give you what’s left of the money after the tax has been paid.

Tom Adams

PS – There’s no age-based one-time tax break.

On September 28th, 2009 Barbara said:

My Grandmother is in an assisted living facility and my mother is the Co-Owner of her Savings Bonds. It was issued to and paid by my grandmother, if my mother signs the bonds who would be responsible to pay taxes on the interest?

On September 29th, 2009 Tom Adams said:

Barbara – If your mother cashes the bonds, the 1099-INT will be issued in her SSN. As a practical matter, this means she should add the income to her tax return.

Theoretically, if her tax rate was a lot higher than your grandmother’s tax rate, it is possible to put the taxes on your grandmother’s return using a nominee distribution (see above).

The IRS says that’s what you’re supposed to do anyhow, but few people do.

Tom Adams

On November 2nd, 2009 Judy Schlemm said:

My Father has some EE savings bonds that have my Mother as benificiary. My Mother passed away and he would like to change the benificiary. Please advise which form needs to be completed in order to do so.

On November 3rd, 2009 Tom Adams said:

Judy – the info you’re looking for is here.

Tom Adams

On November 12th, 2009 Donna White said:


My fiance bought some bonds. His now adult son’s SSN is on the bonds with my fiance listed as co-owner. His son will likely be filing for SSI, a means tested benefit.

Since my fiance purchased the bonds, are these his assets?

On November 13th, 2009 Tom Adams said:

Donna – the person who put up the money for the bonds is considered the principal owner by the IRS.

The person whose SSN is on the bond is considered the owner by the Social Security Administration.

Your fiance and his son should have the registration of the bonds changed so that the son is removed (and the SSN is changed).

Another alternative is for your fiance to open a Treasury Direct account and covert the bonds into electronic bonds. This will also have the effect of removing the son’s SSN from the bonds.

Here’s more information on changing the registration and on converting paper bonds to electronic ones.

Tom Adams

On December 6th, 2009 Debra Glazer said:

I have a question regarding HH bonds.
My mother is the owner of HH bonds that were issued in exchange for E bonds or EE bonds. The HH bonds reached final maturity (after 20 years) in August 2009. [The original maturity period was 10 years, followed by an extended maturity term of an additional 10 years). Each HH bond includes accrued interest on which tax was not ever paid on the original E or EE bond.

Question: Can she delay cashing in the matured HH bonds (that is, delay in presenting them for redemption) until January 2010, thereby delaying having to pay the tax on the accrued interest until the 2010 tax year? Or, will she automatically be issued a 1099-INT for all of the accrued interest during 2009, even though she delays cashing in the bonds (presenting them for redemption) until 2010?

Thank you

On December 7th, 2009 Tom Adams said:

Debra – I don’t know the answer to your question. Here’s why: HH bonds are handled by a special group at the Treasury that follows IRS rules a bit more closely than the rest of the Savings Bond team.

What the IRS would like is for the entity cashing the bond to put the year the bond stopped paying interest on the 1099. I suspect this group does this, and I doubt they’ll automatically send you a 1099, but I don’t know either of these for sure.

It would be helpful if you report back on your experience.

Tom Adams

On January 6th, 2010 Oscar Ford Jr said:

I plan to donate some EE bonds to a catholic school. Will I still be liable for the interest on my income tax?

On January 7th, 2010 Tom Adams said:

Oscar – you will have to add the interest income to your taxes and you will be able to offset that income with a charitable deduction.

You can’t just give the bonds to the school. You have to cash them and give the school the money. If you’re concerned about taxes, you could hold back what you need for taxes before you make the gift.

Tom Adams

On January 10th, 2010 Linda said:

I’ve read through all of the Q&A on this page but I don’t think the answer to my question is here… My grandfather recently passed away and left EE bonds purchased in 1992 POD to myself and my siblings. My question is who is responsible for the taxes owed on these bonds? He has a trust, would the trust be responsible or are we since we are cashing them?

On January 11th, 2010 Tom Adams said:

Linda – The IRS expects the person who cashes the bonds (since you’re POD you’ll need a copy of your grandfather’s death certificate to do this) to add the interest to her income. If the trust isn’t named on the bonds then its not relevant.

Tom Adams

On January 27th, 2010 Tom said:


Couple of questions. I was thinking of cashing in my son’s 22 EE bonds, then deposit the cash into his 529. Of the 22 bonds, all are made out to him with me being the co-owner on 18 and POD on the other 4 (not sure what POD is?). Anyway, is it best for him to cash out due to his low tax rate (he is 17)? Where does the tax show up seeing he still is a dependant on mine and my ex-wife’s tax returns? Any help would be appreciated.


On January 28th, 2010 Tom Adams said:

Tom – POD means “payable on death” – you’re the “named beneficiary” on those bonds. Whether this makes any sense depends, among other things, on how much interest we’re actually talking about. Until he’s 18, the tax would go to you.

Whatever you do, make sure you discuss it with him and he agrees.

Tom Adams

On January 28th, 2010 Tom said:

The interest amount is $958. Does it make sense for these bonds to mature a bit more, then have him cash out when he turns 18?

On January 29th, 2010 Tom Adams said:

Tom – because of the way the bonds are registered they can’t be used for a college education deduction, so neither cashing them nor holding them would be “a mistake.”

But you’ve held them this long – what’s the sudden hurry to cash them? If I were your son, I’d want to hold on to them until I needed the money for something.

And after he’s 18 he’s responsible for the taxes, not you. And his tax rate will most likely be a lot lower than yours.

Tom Adams

On February 21st, 2010 Juanita Behill said:

I have EE savings bonds for my 3 daughers. 1 is now 25 years old and not going to college. The other two are 21 and 18 and going to college. Would it be a good idea to transfer the 25 year olds bonds to her 2 yr old son for his college or better for her to keep in her name. Better as, in what way will she be taxed more?

On February 22nd, 2010 Tom Adams said:

Juanita – This is a much more complicated question than it appears because the answer depends on a lot of things you don’t mention.

Let’s start with your two younger daughters who are going to college. You may qualify for the Savings Bond college education deduction on those bonds if you or your husband are the owner and neither child is a co-owner.

But if the bonds have the children’s names on them as owner or co-owner, as you suggest, then that deduction isn’t available. On the other hand, assuming they don’t have any other income in college, the taxes on cashing the bonds will be zero or close to it.

But you didn’t ask about them, you asked about your older daughter’s bonds. The odds are there would be no significant reduction in taxes if she did anything. If the total value of the bonds is less than $10,000, I’d suggest you keep them in her name for now. If it’s more than that, you should spend a weekend reading my book, because, as I said earlier, this is complicated.

Tom Adams

On February 22nd, 2010 Ruth Henry said:

My mother died March 2009. I am the Personal Representative for the estate. She has about $60,000 in Series I Bonds [no beneficiaries or co-owners listed on the Bonds themselves]. Her will is in Probate now. I would like to cash the bonds and have the estate pay the taxes on the interest earned to the date of her death. How would I accomplish this? When I redeem the bonds will I have them payable to the Estate, and her Tax ID? Two other I Bonds were POD to me. Can I have the taxes on the interest earned on those also paid by the estate [up to the date of death] even though a 1099 came to my Social Security number? I have not yet filed her 2009 Income Taxes.

On February 23rd, 2010 Tom Adams said:

Ruth – What you want to do is technically possible, but the process is fairly complex. I cover it in my book. Older I bonds are one of the best investments available today – the book will also help you decide if cashing the bonds is really in your best interest.

Tom Adams

On February 24th, 2010 Ruth Henry said:

Dear Tom,
I have read your book and it is excellent. I am wanting to make sure I understand the process, as my accountant was not familiar with the process. On the POD I Bonds that I have already cashed, I would report the interest on my tax return–Schedule B–and indicate Nominee Distribution– reporting my mother’s Social Security number–[backing out the interest from the total] and at the same time report the interest earned to the date of her death on her final tax return.

If we decided to keep the other I bonds, then I could re-register them, and also pay the interest earned to date of death on her final tax return now.[being sure to keep the record of this and provide that to the new registrant to avoid double tax.]

If this is right, then I will discuss this process with my accountant. Thank you.

On March 11th, 2010 Nancy said:

My husband owned EE bonds as co-owner with my son. My husband died in 2003. I understand that my son is now sole owner. He cashed the bonds in 2009 and paid me for a student loan for the education he has received. Is he still responsible for the interest on the bonds?

On March 16th, 2010 Tom Adams said:

Nancy – yes, your son will receive the 1099-INT tax form reporting the interest to the IRS and he is responsible for the taxes. He should have held some money back to pay them and given you the rest. Now he has nothing to pay the tax with.

Tom Adams

On March 22nd, 2010 Nancy said:

My uncle passed away in 2008 and a tax return was filed. My aunt who is the personel representative, is thinking that there will be no taxes on these bonds. I am one of the three beneficiarys’ I believe someone has to file and pay these taxes.

The bonds were cashed in December of 2009. So does my aunt file a return for my uncle? Or does my aunt have to claim the interest on her tax return? I also question that she waited a whole year to cash these in…will that effect anything?

What tax rate are the bonds taxed at 33percent of the interest?

On March 23rd, 2010 Tom Adams said:

Nancy – Your family is a good example of a family that would have benefited from a weekend reading my book, but it’s too late for that now.

You aunt will have to claim all the interest the bonds ever earned as income on her 2009 return. She should have gotten a 1099-INT tax form from the bank where she cashed the bonds telling her how much Savings Bond interest to add to her tax form.

Waiting a year doesn’t have an impact. In fact, there was no need for her to cash them at all. She could have simply had the registration changed to her own name.

I don’t understand your last question. Try asking it again.

Tom Adams

On March 24th, 2010 Nancy said:

The last question is this,

What is the tax percentage on the interest earned, is it at 33%?


On March 24th, 2010 Tom Adams said:

Nancy – the per cent of the interest that will go to taxes depends on your mother’s filing status and total taxable income. It varies from 0% to 35%. Check out this page on U.S. tax brackets.

Tom Adams

On March 31st, 2010 Christine said:

I had some HH bonds that my father had bought originally as EE bonds and then converted them to HH for my son. My father’s Social Security number was on them and my son listed as a co-owner who is 16 years old. My son cashed these bonds under his social security number and recieved a 1099 for them. I went to file my son’s tax return and it is asking for the parent’s adjusted gross income and social security number and is taxing me an additional 300.00 in addition to the 571.00 that is due under my sons tax bracket. What is the best way to report the interest on these bonds? Should I have included them on my Dad’s tax return since he is the original owner and paid for them and has been receiving the interest. I have already filed my father’s 2010 taz return! Why do I have to be included in the tax assesment when I did not own these bonds? Could you please tell me what forms I need to fill out or if I have to make an amendment to my Dad’s return or should I just pay the additional tax under my son’s return?
I don’t believe I can just file the income under my joint return because my son earned 4,000 of his own money at a part time job.
Thanks in advance for your answer.

On April 1st, 2010 Tom Adams said:

Christine – I can answer your questions about Savings Bonds and attempt to answer your questions about taxes, but I am not a tax expert.

You could have added the interest income to your father’s return and entered then subtracted it from your son’s. In fact, the IRS would say this is the proper way to do this. One possibility is to file an amended return for him. Sorry, I don’t have any advice on how to do this.

Otherwise, you are tangling with what’s known as the kiddie tax, which requires that the investment income of a child under 18 over a threshold amount be taxed at the parent’s rate.

Tom Adams

On April 2nd, 2010 S Nicholas said:

My mother gave my kid series e bonds. registrations says: ‘Mary Grandma or Sara Gdaughter’. My daughter is 10. I understand that whoever cashes them in will have the 1099 issued in their SS#. So if we have our daugter cash these in now interest is taxed at our rate because of the kiddie tax rule. What happens if we wait until she is going to college? Can she cash them in then for college expenses. I understand there would be no tax due on the interest but we would lose the ability to claim her as a dependent? Our income is over the exclusion amount so if we cash them in ourselves and a 1099 is issued to me then we lose the tax free status of the accrued interest even if used for college. Thanks for your help.

On April 5th, 2010 Tom Adams said:

S – It depends on how much the bonds are worth. Your child can have investment income below a threshold amount without triggering the kiddie tax. This is too complicated to get into here because it depends on how much income the child has from investments and from a job, but IRS Publication 17 has the details. You could stay under the threshold by cashing a few bonds each year.

Also, I think your understanding about the college education deduction is flawed. Your daughter would not be eligible for it with these bonds. There’s more info on that here.

Tom Adams

On April 8th, 2010 Mike said:


My daughter and I had E bonds in both our names, 1-10K 1-2K.I sent her to the bank to deposit in our joint account for her college expenses. She received a 1099 and I filed it under my taxes. We have now received from IRS an adjustment to her taxes due to the 1099 in her name and not mine. How do we resolve? Have her issue me a 1099 and refile both tax returns?

On April 8th, 2010 Tom Adams said:

Mike – she should file an amended return. Follow the instructions in the Nominee Distribution section at the top of this page.

If you already included the interest on your return, you don’t need to file an amended return. But if you didn’t, you need to file an amended return to add the interest to your return.

Tom Adams

On April 13th, 2010 Janet Domeier said:

I will be inheriting some Series EE bonds from my Aunt’s estate. I understand that these bonds will be reissued to me on a From 1455. I think I will add each of my sons as the co-owner on some of the bonds and in that case Form 4000 also has to be completed. My question is – who is responsible for the taxes when either of my sons cash the bonds that they are co-owner of?

On April 13th, 2010 Tom Adams said:

Janet – If your son cashes the bond, the 1099-INT will be issued in your son’s SSN, but at the above makes clear, the IRS would consider you the principal owner (you inherited the bond, not your sons) and responsible for the tax.

Tom Adams

On April 25th, 2010 Kevin said:


My grandmother owns numerous E and EE bonds (some that have already passed the 30 year maturity date). All of the bonds are held in her trust and now, since she is basically giving the government a “free loan” she is wishing to cash in and gift them to my mother, brother, and myself. She is however, leary of having to pay income tax on any interest earned, but from what I have been reading, this is inevitable. Please advise.

On April 26th, 2010 Tom Adams said:

Kevin – It is inevitable and the sooner it’s done and over with the better.

Tom Adams

On May 24th, 2010 Vicki said:

Hello Tom,

I am 24, and my parents had purchased around $8000 (current value) of bonds for me over the 1990s. Some of the bonds (maybe half) have my father as the sole owner and me as the beneficiary (POD). Also, some of these bonds are earning really, really low interest rates, and I’m interested in redeeming them and investing the money into a higher return bond fund.

My parents would like to avoid paying taxes on these bonds. Can my father add me as a co-owner to these bonds, then if I redeem them, I could have the tax liability on my SSN?

Of note, I was planning on creating a TreasuryDirect account and exchanging the better yielding bonds into that. If this process would be easier in putting all of the bonds into a TreasuryDirect account first, I would go that route.

Thanks for your help!

On May 24th, 2010 Tom Adams said:

Vicki – the article at the top of this page answers your question, I believe. I’m sorry the answer is murky, but it is what it is. The Savings Bonds process allows things that the IRS doesn’t agree with.

In any case, if you have your own TreasuryDirect account, you’d only be able to transfer bonds with your name listed first into it.

Tom Adams

On May 26th, 2010 Cory said:

Okay so i have three savings bonds worth a total of $1,033.96, a 500 bond, a 200, and a 100. im wondering if i cash them all at once who will get taxed? My name is the owner on two of the bonds and im the co-owner on the 500 bond. Will i be taxed for these if i cash them? and if so how do i go about doing the taxes since im only 18. Will the 1099-INT be mailed to me?
Thanks for your help, Cory

On May 26th, 2010 Tom Adams said:

Cory – If you cash the bonds this year, you will receive a 1099-INT in the mail by the end of January 2011 and you may have to file a tax return for 2010 by April 15, 2011.

Whether you have to file or not depends on how much interest you’ve earned and on how much other income you have. You may be over the amount for filing but still not have the pay anything. All the rules are on http://www.irs.gov.

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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