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Uncle Sam wants tax on savings bond interest

by on
in Small Business Tax

Q. I found some HH Savings Bonds from years ago. Do I still owe income tax if I cash them in now? S.M., Farmingdale, N.Y.

A.
Yes. In many cases, taxpayers converted old Series E Bonds into HH Bonds to avoid taxation on bonds that had fully matured. But you have to pay tax on the built-up interest when you cash in the HH Bonds.

Uncle Sam stopped issuing HH Bonds on Sept. 1, 2004. You can find out the current value of the HH Bonds by visiting www.publicdebt.treas.gov.

Tip: Reduce the tax liability by cashing in the HH Bonds in different years. For example, you might redeem some in 2009, some in 2010 and the balance in 2011.

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