Are U.S. Savings Bonds Taxable on State Returns?
- The last Series E bonds were issued in June of 1980. They paid interest for up to 30 years. All Series E bonds have ceased paying interest. Series EE bonds replaced Series E bonds. Paper Series EE bonds are purchased at 50 percent of their face value. Electronic Series EE bonds are purchased at face value to the penny in amounts of $25 or more. Series EE bonds can be redeemed after 12 months, but bonds redeemed prior to five year are subject to a three-month interest penalty. Interest on Series E and EE savings bonds is subject to federal income tax. Interest on Series E and EE savings bonds is exempt from income taxes imposed by any state or local state subdivision.
- Series H have ceased earning interest. Series HH bonds were only available to bondholders who wished to exchange their existing Series E or EE bonds and to bondholders who wanted to reinvest their maturing Series H bonds. The last exchanges and re-investments were made into Series HH bonds on September 1, 2004. Interest on Series HH is paid every six months and subject to federal income taxes. Interest on Series H and Series HH bonds is exempt from income taxes imposed by any state or local political subdivision.
- Series I savings bonds were created to provide a safe place to invest savings dollars without having to worry about fluctuating interest rates. Series I feature a combination of an interest rate that is fixed for the life of the bond and a variable rate adjusted semiannually, based on changes in the Consumer Price Index. Interest is paid when you cash the bond. Interest on Series I savings bonds is subject to federal income taxes. Interest on Series I bonds is exempt from any state or local income taxes.
- You may be able to exclude the interest earned on Series EE and Series I savings bonds from your federal income taxes if you meet certain requirements and use the money to pay for expenses associated with higher education. You must be 24 years old or older before the bond's issue date, and either you, your spouse or your dependent must incur expenses that are required by the post-secondary educational institution for admittance or attendance, which may include tuition and fees but not room, board or books.
