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Tax on US Savings Bonds

Tax on US Savings Bonds' interest need to be paid to the IRS. Most of the time the owner of the US Savings Bonds pay tax on the interest. However, sometimes US Savings Bonds are owned by more than one person. Who pays the tax on interest of US Savings Bonds is defined on the following table. This table on Who Pays the Tax on US Savings Bond Interest can be found in the IRS Publication 17 (page 59).

Tax on US Savings Bonds

Are interest on US Savings bonds tax exempt?

Interest on US Savings bonds is exempt from state and local taxes.

What are the rules on proceeds from US Savings Bonds and higher education expenses?

There is an exception for higher education expenses incurred the same year the US Savings bonds are redeemed.

All or part of the proceeds from qualified Series EE US Saving bonds issued after 1989 and Series I US saving bonds may be redeemed tax free for qualified higher education expenses (tuition and fees).

  • The US Savings bonds must be issued in either your name (sole owner) or in your or your spouse's names (co-owners), and
  • You must be at least 24 years old before the US Savings bonds issue date

If the proceeds are more than the education expenses, you can exclude only part of the interest from your tax return.



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