What Savings Bonds can do for you
Taxes and education
Savings Bonds customer support
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The $200 I Bond |
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The $200 Series EE |
You get more from Savings Bonds than just the interest rates you earn.
Your Savings Bonds earnings are exempt from state and local income taxes. You can also wait to pay federal income taxes until you redeem your Savings Bonds.
This means money in your pocket for up to 30 years that otherwise could be paid in taxes.
Your earnings may also be exempt from federal income tax when you use Savings Bonds to pay higher education expenses for yourself or others in your immediate family.
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You don't pay any state or local income tax on interest earned from the I Bond and Series EE Savings Bond.
On top of that, you don't have to pay any federal income taxes on earnings until you either redeem your Savings Bonds, or until they reach final maturity, 30 years after the purchase date.
This means you have the option of redeeming Savings Bonds and paying taxes on the interest when it's best for you.
If you own Series EEs and want to postpone paying federal tax on the earned interest, you can exchange them for Series HH Savings Bonds.
This allows you to defer the EE Savings Bond interest for up to an additional 20 years, while getting reportable interest payments twice a year at the HH rate. PLEASE NOTE: The Treasury Department will no longer issue HH/H bonds after August 2004. After August 31, 2004, you will no longer be able to reinvest your HH/H or exchange your EE/E bonds for HH bonds.
Additionally, interest on I Bonds and Series EE may be exempt from federal income taxes when used for qualified education expenses.
You may not have to pay federal taxes on your earnings from I Bonds and Series EE Savings Bonds if they are used to pay for qualified higher education expenses.
Savings Bonds bought since January 1990 are eligible for this benefit.
The exclusion covers tuition and fees (such as lab fees and other required course expenses) at eligible schools.
Eligible schools are generally post-secondary institutions, including vocational schools, that meet the standards for federal assistance, such as guaranteed student loan programs.
It also covers payments to qualified state tuition programs.
Registration and income guidelines apply as explained in the education benefit FAQ on this site.