How savings bonds are taxed

Federal-only, state-exempt, and due at redemption or final maturity — whichever comes first. The rules, cited to TreasuryDirect and the IRS.

• Savings bond interest is subject to federal income tax but exempt from state and local income tax (TreasuryDirect).
• Interest becomes reportable in the year the bond is cashed or reaches final maturity, whichever comes first — a matured bond's interest is taxable even if the bond is never cashed (TreasuryDirect).
• You get a Form 1099-INT for the year of redemption — from the bank that cashed the bond or in your TreasuryDirect account (TreasuryDirect).
• Interest on EE and I bonds issued after 1989 can be excluded from federal tax when the money pays qualified higher-education costs, subject to income limits (IRS Form 8815; TreasuryDirect).

The basics

Interest on Series E, EE, I, and HH savings bonds is taxable at the federal level as ordinary interest income, and is exempt from all state and local income tax (TreasuryDirect: tax information). There is no capital-gains treatment — the growth in a bond's redemption value is all interest.

When you cash a bond, whoever cashed it receives a Form 1099-INT for that tax year showing all the interest the bond ever earned (unless it was being reported annually — below).

The maturity tax trap

The reporting deadline is redemption or final maturity, whichever comes first. A Series EE bond that reached final maturity in 2020 had its interest become reportable for tax year 2020 — even if it sits uncashed in a drawer today (TreasuryDirect). This is the single most misunderstood savings-bond tax rule, and it applies to a large share of the matured, unredeemed bonds Treasury reports. Holders discovering long-matured bonds should raise the timing question with a tax professional; this page describes Treasury's rule, not how to resolve a missed year.

Deferred vs annual reporting

Two permitted methods (TreasuryDirect):

• Deferral (the default): report all the interest in the year the bond is cashed or matures. Almost everyone does this.
• Annual reporting: elect to report each year's accrued increase as income each year. The election applies to all your savings bonds and future ones; switching back requires IRS permission. Sometimes used for bonds owned by children with little other income.

The education exclusion (Form 8815)

Interest on Series EE and I bonds issued after 1989 can be excluded from federal income tax when the redemption proceeds pay qualified higher-education expenses (tuition and fees) in the same year (TreasuryDirect: using bonds for education). The main conditions, per IRS Form 8815:

• The bond owner was at least 24 years old before the bond's issue date (a bond in a child's name does not qualify).
• The expenses are for the owner, spouse, or a dependent, at an eligible institution, net of tax-free scholarships and similar aid.
• Married owners must file jointly to claim the exclusion.
• The exclusion phases out above income limits set each year. For tax year 2026, the modified-AGI phase-out is $101,800–$116,800 (single/head of household) and $152,650–$182,650 (married filing jointly); above the top of the range, no exclusion. Check the current Form 8815 instructions for the year you redeem.

Inherited bonds

Interest on an inherited bond is taxable to whoever ultimately receives it, with an option to report pre-death interest on the decedent's final return — the mechanics are on inherited savings bonds.

This page summarizes TreasuryDirect and IRS rules and links to every source; it is not tax advice. For how the rules apply to a specific situation, consult the linked IRS guidance or a tax professional.

Frequently asked questions