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No give-away for U.S. Savings Bonds

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in Small Business Tax

Q. I’ve owned approximately $15,000 in Series EE Savings bonds for 10 years. Can I transfer them to my kids in the 0% bracket to reduce tax on the interest? S.R.C., Visalia, Calif.

A. No. You’re not allowed to transfer U.S. Savings Bonds during your lifetime. The only way the bonds can be transferred is through an inheritance. Alternatively, you can acquire new Savings Bonds and give them to your children as gifts.

Tip: In any event, interest income received by a U.S. Savings Bond holder is taxed as ordinary income. It does not qualify for the maximum 15% tax rate on long-term capital gains and dividends (0% for low-bracket taxpayers in 2008).

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