Tax information for HH savings bonds

HH savings bonds earn interest every 6 months. We pay that interest to the bond owner every 6 months, using direct deposit.

Is that interest taxable?

Federal income tax: Yes

State and local income tax: No

Who owes the tax? Who gets the 1099-INT?

The 1099-INT is the form that tells you how much interest we paid on your bonds in the previous year. (INT stands for "interest.") The IRS also gets this information.

Situation	Who owes the tax. Who gets the 1099-INT
You are the only owner of the bond	You owe the tax. You get the 1099-INT.
You and your spouse live in a community property state. The HH bond is community property. You file separate tax returns.	You and your spouse must each report half the interest.

We send only one 1099-INT. We send it to the person whose name is first in the bond's registration.

When must I report the interest?

The interest your HH bond earns in a given year must go on your federal income tax return for that year.

Where do I list the interest on the tax return?

Interest from your bonds goes on your federal income tax return on the same line with other interest income.

What about "deferred interest"?

Certain HH bonds weren’t available for cash only. To buy those HH bonds, you had to trade in another security you had bought earlier.

In making the exchange, you may have used interest the original security had earned to help pay for the HH bond.

If you used an old bond to buy more than one HH bond, the interest you used to buy the bonds was divided proportionately among the HH bonds.

You had a choice then for the tax on that interest:

pay it then, or
wait and pay it later (defer it)

Interest that you decided to pay later is "deferred interest."

How do I know if my HH bond has deferred interest?

If your HH bond has deferred interest, you see the amount identified on the front of the bond.

When do I pay tax on the deferred interest?

You don't have to report deferred interest on your federal income tax return until you are filing your return for the year in which the first of these events occurs:

You cash the HH bond.
The HH bond stops earning interest. (This happens 20 years after issue.)
The HH bond is reissued to show a change in ownership that is a taxable event. Reissuing or replacing a savings bond

We show the deferred interest on a 1099-INT for that year.

Deferred interest is not money we owe you in addition to the face value of an HH bond. It is part of the face value of the HH bond.