Are Savings Bonds Taxable? Federal Tax on Savings Bond Interest

Yes: the interest on a US savings bond is subject to federal income tax, and it is exempt from state and local income tax (31 U.S.C. 3124(a); 31 CFR Part 351, Appendix).

The tax falls on the interest only, never on the price paid. Only the oldest bonds escape the federal tax: Series A, B and C of every year, and Series D bonds issued through February 1941.

The interest is reported for the year the bond is cashed or reaches final maturity, whichever comes first, or every year if the owner chooses yearly reporting. The person whose money bought the bond reports it, with set rules for co-owners, children and heirs.

ClaimMyBonds is a private, independent site, not the IRS or Treasury; it states the rules from IRS Publication 550 (2025) and gives no tax advice. How paper and electronic bonds work is explained in our guide to US savings bonds.

Is Savings Bond Interest Taxable? Federal Income Tax Yes, State and Local No

Savings bond interest is taxed by the federal government and not by states or localities.

Treasury's own wording is that savings bonds "are exempt from taxation by any State or political subdivision of a State, except for estate or inheritance taxes" (31 CFR Part 351, Appendix, question 1). A political subdivision is a local government, such as a county or a city.

The same split applies to Series EE, E and I bonds: 31 CFR 316.9(a) states it for Series E, war bonds included, and 31 CFR Part 359, Appendix D for Series I. The interest belongs on the federal return, and state and local income taxes cannot reach it.

What Counts as Taxable Interest on a Savings Bond

The taxable interest on a Series EE or I bond is the difference between its purchase price and its redemption value (IRS Publication 550 (2025)).

The redemption value is the amount Treasury pays when the bond is cashed. A paper EE bond cost half its face value, the amount printed on it, and a paper I bond cost its full face value.

A $100 paper EE bond issued in December 1988, for example, cost $50.00. It is worth $207.36 in November 2026, so $157.36 of that value is interest (Savings Bonds Value Files, updated November 2, 2026).

That bond reached final maturity on December 1, 2018 and no longer earns. If it was never cashed, its interest was reportable for tax year 2018 on the default method, the year of final maturity (26 U.S.C. 454).

Savings bond interest goes on line 2b of Form 1040 or 1040-SR as taxable interest. Schedule B, Part I, is required once taxable interest tops $1,500, among other triggers (IRS Publication 550 (2025)).

A savings bond calculator gives that interest figure for one paper bond. Our savings bond calculator, built on Treasury's published value files, shows the interest earned since issue on a paper EE or E bond.

The State and Local Tax Exemption (31 U.S.C. 3124) and What It Does Not Cover

31 U.S.C. 3124(a) exempts savings bonds from state and local taxation, with two exceptions: estate or inheritance taxes, and a nondiscriminatory franchise tax on corporations.

The statute covers all stocks and obligations of the United States Government, so savings bonds share the exemption with other Treasury obligations (31 U.S.C. 3124, U.S. Code 2024 edition). The franchise tax exception concerns corporations, not individual owners or heirs.

Four other taxes do apply to savings bonds: federal estate, gift and excise taxes, and state estate or inheritance taxes (TreasuryDirect Series EE page; 31 CFR Part 359, Appendix D, for I bonds).

"Tax-free" is therefore wrong for a savings bond unless it reads "free of state and local income tax". How a state income tax return shows the exemption is outside this page; the state's return instructions or a tax professional answer that.

Which Savings Bond Series Are Taxable

Every savings bond series pays federally taxable interest except Series A, B and C (all years) and Series D bonds issued through February 1941 (TreasuryDirect old-series page). The 8 rows below give both answers for each series and its issue dates.

Federal and state income tax on US savings bond interest by series. Sources: TreasuryDirect tax and old-series pages; IRS Publication 550 (2025); 31 U.S.C. 3124(a).

Series I bonds follow the same tax rules as Series EE: federal income tax yes, state and local income tax no (31 CFR Part 359, Appendix D). Two names printed on older bonds do not mark separate series.

Patriot Bonds are paper Series EE bonds issued December 2001 to December 2011, and war bonds are Series E bonds sold from 1941 to 1945. Both are taxed exactly like the series they belong to.

When Savings Bond Interest Is Taxed: Cashing, Final Maturity or Every Year

Savings bond interest is reportable for the year the bond is cashed, disposed of or reaches final maturity, whichever comes first, unless the owner reports it every year (26 CFR 1.454-1(a)(1)).

IRS Publication 550 (2025) calls this Method 1, the default for any owner who never chose yearly reporting. For a bond that reached final maturity in an earlier year, that earlier year is the year the rule names, even if the bond is cashed later (26 U.S.C. 454).

Method 2 is the yearly alternative. It is an election under 26 U.S.C. 454(a) to report each year's increase in value, and it covers every Series EE, E and I bond the owner holds and later acquires, never bond by bond.

Switching from Method 2 back to Method 1 needs a statement headed "131" attached to a timely return, or Form 3115, with no user fee (Publication 550 (2025)).

Taxpayers who use the accrual method of accounting must report the increase every year. The table below sets out 7 events, with who reports and the rule for each.

Events that make savings bond interest taxable. Source: IRS Publication 550 (2025); 26 CFR 1.454-1.

Final Maturity Makes the Interest Taxable Even if the Bond Is Not Cashed

A savings bond's deferred interest becomes taxable in the year of final maturity, even if nobody cashes the bond (26 CFR 1.454-1(a)(1)). Final maturity is the date a bond stops earning interest; its value never changes after it.

A paper EE bond reaches final maturity 30 years after its issue date (31 CFR 351.5). Every EE bond issued January 1980 to November 1996 has stopped earning, and December 1996 issues stop on December 1, 2026.

Paper EE bonds issued in 1996 therefore reach final maturity during 2026. On Method 1, their interest is reportable for tax year 2026, cashed or not. A $100 bond from any of the 12 issue months of 1996 cost $50.00 and is worth $125.24 to $128.64 at final maturity.

Its interest is therefore $75.24 to $78.64 (Savings Bonds Value Files, November 2026). The December 1996 bond is worth $126.60 in November 2026 and $128.64 from December 1, 2026. Bonds issued in 1997 follow the same path in 2027.

Every Series E bond stopped earning interest by June 2010, and every HH bond reached final maturity in August 2024. On Method 1, that interest was reportable for each bond's own final-maturity year.

HH bonds also carry deferred interest, carried over from E or EE bonds exchanged for them until August 31, 2004. For HH bonds dated 2004, that deferred interest was reportable for 2024, and Treasury sent a 1099 at the end of 2024 even for bonds not cashed (TreasuryDirect HH tax information).

Final-maturity interest never reported in its year is a separate case. No IRS or Treasury guidance on it was found in the sources behind this page; that return is a question for a tax professional.

Reissue, Trust Transfer and Divorce Can Make Deferred Interest Taxable

A reissue that removes the person who paid for the bond makes that person report all interest not yet reported, in the year of the reissue (IRS Publication 550 (2025)). A reissue is Treasury's re-registration of a bond into different names.

Reissuing a bond into your own name alone is not a tax event. FS Form 4000, Treasury's reissue form (Revised April 2026; PDF, TreasuryDirect), prints the notice that the obligation to report the interest "cannot be transferred to someone else through a reissue transaction."

The same rule applies to transfers between spouses or incident to a divorce (outside community property), and to a transfer to a trust in which the owner gives up all ownership. The exception is a grantor trust, in which the owner is treated as the owner of the trust and the interest stays deferred.

FS Form 1851 (Rev. April 2026), the form for reissue to a personal trust, has one box for that deferral and one for a 1099-INT in the reissue year. Co-owners who bought a bond jointly and split the reissue in proportion to what each paid report nothing at reissue (Publication 550 (2025)).

Who Pays the Tax on Savings Bond Interest

The person whose money bought the bond reports its interest, even when another co-owner cashes it (IRS Publication 550 (2025), Table 1-2). Co-owners are the two people named on a paper bond, joined by "OR".

A co-owner who cashes a bond someone else paid for is a nominee, a person who receives income that belongs to another. That nominee must give the purchaser a Form 1099-INT, the IRS information return for interest.

For heirs, the answer depends on an election on the owner's final tax return. Deferred interest from before the owner's death goes on that final return if the surviving spouse or personal representative (the executor or administrator) elects it.

Otherwise the person who acquires the bond reports it (Publication 550 and 559 (2025)). Savings bonds after death also follow Treasury's ownership rules, which are separate from the tax rules. Heirs cash or reissue an inherited bond through the procedures in our guide to savings bonds after death.

The 6 situations below show who reports the interest in each case.

Note 1: The interest is the child's income even if a parent paid and is the beneficiary. The child or a parent may elect yearly reporting by filing a return that shows all interest to date. Form 8615 applies when the child's unearned income is more than $2,700 (2025) and other conditions are met.

Savings Bond Tax Pages: Form 1099-INT, Education, Inherited Bonds and Reducing the Tax

Four savings bond tax questions branch off the main rule: the Form 1099-INT, the education exclusion, inherited bonds and lawful ways to reduce the tax. Each topic is listed below with the question it answers and its main rule source.

Form 1099-INT. Savings bond interest appears in box 3 of Form 1099-INT, filed when the interest is $10 or more. A bank that cashes a bond enters its own name and taxpayer identification number (TIN).

Treasury mails the form the following January for paper bonds it cashes; electronic bonds show it in TreasuryDirect by January 31. The amount can exceed the taxable interest for Method 2 filers, heirs, nominee co-owners, transfers and retirement-plan distributions.

The excess is subtracted on Schedule B as "U.S. Savings Bond Interest Previously Reported". Interest is reportable even when no 1099-INT arrives.

Education exclusion. Interest on Series EE bonds issued after 1989, or on Series I bonds, can be excluded from federal income (26 U.S.C. 135; Form 8815 (2025)).

The owner was 24 or older before the issue date, and the bonds are in the owner's name, or the owner's and spouse's. They are cashed in the tax year the qualified expenses are paid, and the filing status is not married filing separately.

Bonds in a child's name never qualify. For tax year 2026, the exclusion phases out at modified adjusted gross income of $101,800 to $116,800 (single, head of household, qualifying surviving spouse) and $152,650 to $182,650 (joint) (Rev. Proc. 2025-32, sec. 4.17). Form 8815 (2025) uses $99,500 to $114,500 and $149,250 to $179,250.

Inherited bonds. Deferred interest from before the owner's death is income in respect of a decedent (income earned but never reported by the owner), taxed to the person who acquires the bond.

The exception is an election to report it on the decedent's final return. An heir taxed on that interest may deduct the federal estate tax paid on it (26 U.S.C. 691(c)).

Reducing the tax. IRS Publication 550 describes 4 rules that change when or whether the interest is taxed: cashing time under Method 1, the Method 2 election, the education exclusion and the final-return election for a decedent's bonds.

None removes tax on interest already reportable, and a tax professional can say which fits a given return.

After the Tax Question: Cashing, Finding or Claiming the Bond

Three practical steps usually follow the tax question: cash the bond, find bonds that are missing, or claim a deceased owner's bonds. Treasury's free forms cover each of the 3 steps below when it is done by mail.

1. Cash a paper bond at a bank that offers the service, or by mail with FS Form 1522 (Rev. April 2026): how to cash savings bonds.
2. Find and claim lost bonds with FS Form 1048 (Rev. March 2026); Treasury Hunt has not been available since September 30, 2025: find lost or missing savings bonds.
3. Claim a deceased owner's bonds, for example with FS Form 5336 (Rev. April 2026) for an estate not administered: savings bond forms.

Banks may cash paper savings bonds but are not required to (FS Publication 0022, Rev. October 2022).

Savings Bond Tax Questions

Is a savings bond tax-free?

No, not fully: savings bond interest is free of state and local income tax but subject to federal income tax. Series A, B and C and Series D bonds issued through February 1941 are the exceptions. The education exclusion can also remove federal tax on post-1989 EE and I interest for owners who qualify (Form 8815 (2025)).

Can savings bonds be used to pay student loans?

Savings bond proceeds can pay any bill, but repaying a student loan is not a qualified expense for the education exclusion on Form 8815 (2025). Qualified expenses are tuition and required fees for the taxpayer, a spouse or a dependent, and contributions to a 529 plan or Coverdell education savings account. Room and board do not count.

When can I redeem my I bonds?

An I bond can be cashed 12 months after its issue date, and cashing it before 5 years costs the last 3 months of interest (TreasuryDirect cashing rules; 31 CFR 359.6, 359.7). I bonds issued on or before January 1, 2003 had a 6-month minimum instead. Under Method 1, the interest is reportable for the year the bond is cashed.

Does savings bond interest count as income?

Yes: savings bond interest counts as taxable interest income on the federal return, on line 2b of Form 1040 or 1040-SR. It is not income for state or local income tax (31 U.S.C. 3124(a)).

Do you pay taxes on savings bonds when you cash them?

Yes, cashing a savings bond is a taxable event for any interest not yet reported. A bank or Treasury issues a Form 1099-INT when that interest is $10 or more (Instructions for Forms 1099-INT and 1099-OID, Rev. January 2024). Interest already reported, under Method 2 or at final maturity, is not taxed twice. For a bond that reached final maturity in an earlier year, that earlier year is the one the rule names (26 U.S.C. 454).

Is there a savings bond tax calculator?

A calculator cannot give the tax itself without the rest of the return, but the taxed amount is the bond's value minus its purchase price. Our savings bond calculator shows that interest for paper EE and E bonds as of November 2026. The tax due is a question for a tax professional.

Are old war bonds taxable?

Yes: war bonds are Series E bonds, and Series E interest is subject to federal income tax and exempt from state and local income tax (31 CFR 316.9(a)). Every Series E bond stopped earning interest by June 2010, the war bonds sold from 1941 to 1945 included. On Method 1, each bond's interest was reportable for its own final-maturity year (26 U.S.C. 454).

Where the Federal Tax Rules for Savings Bonds Are Published

The main rules on this page come from these 5 primary sources, listed below.

• IRS Publication 550 (2025), Investment Income and Expenses, chapter 1
• IRS Publication 559 (2025), Survivors, Executors, and Administrators
• 26 U.S.C. 454 and its regulation, 26 CFR 1.454-1
• 31 U.S.C. 3124
• TreasuryDirect, "Tax information for EE and I bonds"

IRS Publication 550 for tax year 2026 had not been published when this page was reviewed on November 11, 2026.