The interest a deceased owner had not yet reported on a savings bond is taxed either on the owner's final income tax return or to the person who acquires the bond, and the surviving spouse or personal representative decides which (IRS Publications 550 and 559, 2025 editions).
A personal representative is the estate's executor or administrator. Only the interest is taxed, never the purchase price, and the tax is federal: the interest is exempt from state and local income tax (31 U.S.C. 3124(a)).
Here, "heir" means the person who acquires the bond: a surviving co-owner, a beneficiary, the estate or an heir of the estate.
ClaimMyBonds is a private, independent site, not the IRS or Treasury, and gives no tax advice. The general rules sit on our page about federal tax on savings bond interest; this page covers heirs.
Who Pays Taxes on Inherited Savings Bonds: The Final Return or the Heir
Two reporting routes exist for a deceased owner's untaxed savings bond interest: the decedent's final return, by election, or the person who acquires the bond, by default.
Option 1: Pre-Death Interest on the Decedent's Final Return
The surviving spouse or personal representative filing the decedent's final return can choose to include on it all interest the bond earned before the death (IRS Publication 550, 2025 edition). The person who acquires the bond then reports only the interest earned after the death.
Option 2: Income in Respect of a Decedent, Taxed to the Heir
Without that election, the pre-death interest is income in respect of a decedent: income the owner earned but never reported, taxed to the person who acquires the bond together with the interest earned after the death (IRS Publication 559 and Publication 550, 2025 editions).
A part that the estate already reported on its own return is excluded. A cash-method heir (who reports interest when received) may defer the tax until the bond is cashed or reaches final maturity, whichever comes first. The heir may also deduct federal estate tax paid on that interest.
Who Makes the Choice, and Why the Heirs Need to Know It
The choice belongs to whoever files the final return, so heirs learn the answer only if that person tells them. Heirs need it to subtract the part already reported. Whether to elect is a decision for the estate's attorney or a tax professional.
| Route | Who decides | Pre-death interest reported on | Heir reports | Heir's 1099-INT | Rule |
|---|---|---|---|---|---|
| Final-return election | Surviving spouse or personal representative | The decedent's final return | Interest after the death only | Still shows all interest; subtract on Schedule B | Pub 550 (2025) |
| Income in respect of a decedent (default) | No election | The heir's return, with post-death interest | All interest since purchase | Matches, unless the estate reported a part | Pub 550 and 559 (2025); 26 U.S.C. 691(c) deduction |
Who Counts as the Person Who Acquires the Bond
The person who acquires the bond is whoever Treasury's rules make its owner after the death: a surviving co-owner, a POD (payable on death) beneficiary, or the estate and its heirs.
A surviving co-owner or POD beneficiary becomes sole owner, and the bond is not part of the decedent's estate for Treasury's purposes (31 CFR 353.70). That ownership rule is separate from the estate used for federal estate tax.
If the surviving co-owner paid for the bond, the interest was that co-owner's income all along (Publication 550, 2025 edition, Table 1-2), so no pre-death split arises.
| Registration | Who acquires the bond | Who reports pre-death interest | Owner page |
|---|---|---|---|
| Co-owner, decedent paid | The surviving co-owner | Election: final return; otherwise the co-owner | Savings bond co-owner rules |
| Co-owner who paid | The surviving co-owner | The co-owner; nothing to split | None |
| POD beneficiary | The beneficiary | Election: final return; otherwise the beneficiary | POD savings bond beneficiary |
| Estate not administered, $100,000 or less | The voluntary representative, if paid (or the persons entitled, if bonds are distributed) | Under the representative's taxpayer number | FS Form 5336 |
| Estate administered | The estate, then those it distributes to | The estate, then the distributee | Savings bonds in probate |
| Electronic bond | Secondary owner or beneficiary despite any will (31 CFR 363.20), else the estate | As above | Deceased owner's TreasuryDirect account |
Which Interest Counts as Pre-Death Interest
Pre-death interest is the interest the owner had not yet had to report at the date of death, and 3 cases decide how much that is: a bond still earning interest, a bond past final maturity, and an owner who reported every year.
Bonds Still Earning Interest at the Owner's Death
For a bond still earning interest at the death, pre-death interest is its redemption value in the month of death minus the price paid. Redemption value is what Treasury pays if the bond is cashed.
A paper EE bond cost half its face value (31 CFR 351.40), and values change only on the first of a month (31 CFR 351.3). A $1,000 EE bond issued January 2000 is worth $1,246.40 in November 2026, so $746.40 of interest.
Bonds That Reached Final Maturity Before the Owner's Death
A bond that reached final maturity before the owner's death left no deferred interest: under the default method its interest was reportable for the final-maturity year, on the owner's own return (26 CFR 1.454-1(a)(1); Publication 550, 2025 edition). Final maturity is the date a bond stops earning interest.
This applies only when the owner died after the bond's final maturity date: Series E bonds all stopped earning by June 2010, paper EE bonds issued January 1980 to November 1996 reach final maturity by November 2026, and HH bonds all reached it by August 2024.
For an earlier death, the decedent rules above apply. A $1,000 EE bond issued December 1988 is worth $2,073.60 in November 2026, unchanged since December 2018; its $1,573.60 of interest was reportable for 2018. The dates when savings bonds stop earning interest differ by series.
We found no IRS or Treasury guidance on interest the owner never reported; ask a tax professional.
Owners Who Reported the Interest Every Year
An owner who reported the interest every year (the yearly election under 26 U.S.C. 454(a), or the accrual method) leaves only the interest from January 1 of the year of death to the date of death for the final return, and the heir reports only interest after the death (Publication 559, 2025 edition).
The owner's election "does not apply to a transferee" (26 CFR 1.454-1(a)(1)), so the heir's own method applies.
When the Heir Pays: Cashing or Final Maturity
An heir's share of the interest becomes reportable in the year the heir cashes the bond or the bond reaches final maturity, whichever comes first, unless the heir reports yearly (Publication 550, 2025 edition; 26 CFR 1.454-1(a)(1)).
Keeping or Cashing the Inherited Bond
Keeping an inherited bond defers the tax for a cash-method heir; cashing it makes all interest not yet reported taxable that year. A 1099-INT follows: Treasury mails it the following January for paper bonds, and electronic bonds show it in TreasuryDirect by January 31.
An heir who keeps a paper EE or I bond can have it reissued only as an electronic bond in a TreasuryDirect account. That limit applies to reissuing inherited savings bonds.
Final Maturity After the Owner's Death
Final maturity reached after the owner's death makes the heir's interest reportable in that year, cashed or not. A $1,000 paper EE bond issued December 1996 is worth $1,266.00 in November 2026 and $1,286.40 from December 1, 2026, when it stops earning.
An heir who acquires it from an owner who died in November 2026 reports for 2026 either $786.40 (no election) or $20.40 (election).
Treasury does not reissue a bond within one full calendar month of final maturity (31 CFR 353.45(b)), so that bond can only be cashed.
Inherited Series EE Bonds: Worked Examples (November 2026 Values)
A $1,000 paper Series EE bond issued in January 2000, cashed by an heir in May 2027, produces $770.00 of interest: all of it on the heir's return without the election, or $746.40 on the final return and $23.60 on the heir's. The owner is assumed to have died in November 2026.
| Bond (face, issue month, cost) | Value in November 2026 | Heir's cash or final-maturity value | Pre-death interest | Heir reports without election | Heir reports with election | Tax year for the heir |
|---|---|---|---|---|---|---|
| $1,000 EE, January 2000, cost $500.00 | $1,246.40 | Cashed May 2027: $1,270.00 | $746.40 | $770.00 | $23.60 | 2027 (year cashed) |
| $1,000 EE, December 1996, cost $500.00 | $1,266.00 | Final maturity December 1, 2026: $1,286.40 | $766.00 | $786.40 | $20.40 | 2026 (final maturity, cashed or not) |
| $1,000 EE, December 1988, cost $500.00 | $2,073.60 (frozen since December 1, 2018) | $2,073.60 | None deferred: $1,573.60 was reportable for 2018 | Not covered by the decedent rules | Not covered | 2018 (owner's final-maturity year) |
Owner assumed to have died in November 2026 without reporting the interest. Values as of November 2026 (later months from the same release): Bureau of the Fiscal Service, Savings Bonds Value Files, updated November 2, 2026. Rules: IRS Publications 550 and 559 (2025); 26 CFR 1.454-1(a)(1).
The IRS examples follow the same pattern. Publication 550 uses a bond that cost $500 with $200 accrued at death: the heir reports $500 without the election and $300 with it.
Publication 559 uses $94 accrued: the heir reports $500 and may deduct estate tax on the $94, or reports $406 if the election was made. Our page on Series EE savings bonds gives rates and maturity by issue year.
Federal Estate Tax, the 691(c) Deduction and State Inheritance Taxes
Federal estate tax and state estate or inheritance taxes can reach an inherited savings bond, and the 691(c) deduction links estate tax to the heir's income tax.
The Bond's Value at the Date of Death Is Part of the Gross Estate
In the IRS examples, the bond's redemption value at the date of death is included in the decedent's estate (Publications 550 and 559, 2025 editions). The estate is the total value of what the decedent owned, the base for federal estate tax.
The same value decides whether Treasury requires court administration: more than $100,000 (31 CFR 353.71). Executors find the steps under savings bonds in probate.
Deducting Federal Estate Tax Paid on the Interest (26 U.S.C. 691(c))
An heir taxed on pre-death interest can deduct the federal estate tax paid on that interest (26 U.S.C. 691(c), "Deduction for estate tax"; Publications 550 and 559, 2025 editions).
It applies only when federal estate tax was actually paid, and only to the part attributable to the interest.
State Estate and Inheritance Taxes (31 U.S.C. 3124(a))
Savings bonds are exempt from state and local taxation except estate or inheritance taxes and a nondiscriminatory franchise tax on corporations (31 U.S.C. 3124(a); 31 CFR Part 351, Appendix).
TreasuryDirect's EE page lists federal estate, gift and excise taxes and state estate or inheritance taxes as applicable. Which states levy them is outside this page.
Why the Heir's 1099-INT Shows Too Much Interest
The heir's Form 1099-INT reports all interest since the bond was bought, without subtracting interest already reported by the decedent or estate (Publication 559, 2025 edition). Box 3 shows the amount received minus the amount paid (Instructions for Forms 1099-INT and 1099-OID, Rev. January 2024). Publication 550 gives 3 Schedule B steps:
- List the full 1099-INT amount on Schedule B, Part I, line 1 and subtotal it.
- Enter "U.S. Savings Bond Interest Previously Reported" below the subtotal, with the amount reported before you received the bond.
- Subtract that amount and carry the result to line 2.
In Publication 550's example, the 1099-INT shows $500, the executor included $200 on the final return, and the heir includes $300. The rules for Form 1099-INT for savings bonds are on their own page.
Bonds Paid to an Estate or a Voluntary Representative
A bond cashed through FS Form 5336 is paid to the voluntary representative, and the interest is reported under that representative's taxpayer identification number (FS Publication 0065, Rev. January 2025).
FS Form 5336 (Rev. April 2026) is the federal route for an unadministered estate of $100,000 or less; FS Form 5394 (Rev. May 2026) covers closed estates and state small-estate procedures.
When bonds pay a specific-dollar legacy, interest up to the distribution date is the estate's income, and the beneficiary reports only later interest. Our sources do not say how a voluntary representative reports interest belonging to other heirs; ask a tax professional.
Can Heirs Avoid Taxes on Inherited Savings Bonds?
No rule removes the federal income tax on inherited savings bond interest, but 4 rules change who reports it, when, or how much is taxed. The 4 rules are listed below.
- The final-return election, which shifts pre-death interest to the decedent's return.
- The 691(c) deduction, available only if federal estate tax was paid.
- Cashing-year timing under the default method, which runs until cashing or final maturity, whichever is earlier.
- The state and local income tax exemption (31 U.S.C. 3124(a)).
A bond at or past final maturity has nothing left to defer.
After the Tax Question: Claiming the Inherited Bonds
Three practical steps follow the tax question: claim or cash the bonds, find any that are missing, and check the general tax rules.
Cashing or Reissuing a Deceased Owner's Bonds
Heirs cash or reissue a deceased owner's bonds with free Treasury forms, chosen by how the bond is registered and whether the estate is administered. The full process is under savings bonds after death. Processing for transactions not in your name takes 5 months or longer (TreasuryDirect contact page, as of November 11, 2026).
Finding a Deceased Relative's Savings Bonds
Treasury Hunt, a discontinued Treasury search tool, has been unavailable since September 30, 2025, so heirs trace bonds through records and FS Form 1048. See how to find savings bonds of a deceased parent or relative.
Savings Bond Taxes Outside an Inheritance
The general rules for reducing savings bond tax apply to owners and sit on their own pages. Owners reduce taxes on savings bond interest through timing and reporting. The Form 8815 exclusion is covered on the Education Savings Bond Program page; this page makes no claim that inherited bonds qualify.
Inherited Savings Bond Tax Questions
Do I have to pay tax on inherited savings bonds?
Yes: an heir pays federal income tax on inherited savings bond interest unless the decedent's final return or the estate already reported the pre-death part. The heir always reports interest earned after the death.
Do beneficiaries pay taxes on savings bonds?
Yes: a POD beneficiary who becomes the owner reports the bond's untaxed interest, unless the final-return election was made.
Are bonds included in inheritance tax?
Yes: a savings bond's value at the date of death is part of the gross estate for federal estate tax, and states may apply estate or inheritance taxes to it (Publications 550 and 559, 2025 editions; 31 U.S.C. 3124(a)).
Are I bonds taxable?
Yes: Series I interest is subject to federal income tax and exempt from state and local income tax, under the same rules as Series EE (31 CFR Part 359, Appendix D). An inherited I bond follows the decedent rules above; see Series I savings bonds.
How do I change the name on a savings bond?
An heir changes the name on a paper savings bond by asking Treasury to reissue it, with FS Form 4000 (Rev. April 2026) or the estate form for the situation; paper EE and I bonds are reissued only as electronic bonds.
Is there a calculator for taxes on inherited savings bonds?
No calculator can give the tax itself, because the rate depends on the rest of the return; the taxed amount is the bond's value minus its purchase price. Our savings bond calculator gives the interest on a paper EE or E bond as of November 2026, not at a past date of death.