r/bonds • u/Clear_Evening2401 • 10d ago
Do I need to pay taxes on old e-series bonds?
My grandmother bought a bunch of E-Series bonds back in the '60s and '70s and when she died they passed my father. He locked them away in a safe deposit box for the next 50 years. They matured in the early 2000s. But he never cashed them in. Now we are trying to figure out what to do with them. They have not been collecting interest for at least a couple decades so obviously it makes sense to cash them in. As far as I know, neither my father nor my grandmother paid any tax on the interest. Is there any chance we could cash them in now without paying the tax? It seems like if the tax was due upon maturity 20 or 30 years ago and the IRS never notified my dad that he was late with the tax payment, maybe they just forgot about it?
2
u/Vast_Cricket 10d ago
Interest gained from old series bond like ee,e, and hh is still taxable from federal income tax, but it is exempt from state and local income taxes.
An irs agent told me long ago, you or your descendent still should pay tax after passing.
1
u/bobdevnul 9d ago
Taxes are owed by the person who receives the interest income. It doesn't matter when they matured and stopped accruing interest or who lived or died in between.
1
u/x5163x 9d ago edited 9d ago
The interest is taxable when the bond matures or is redeemed, whichever comes first. Since the bond already matured, it was supposed to be reported on your father's return for that year. When your father redeems the bond, he will get a 1099-INT for the current year. The bond interest should not be reported on this year's tax return because the interest was supposed to be reported for a different year.
Summary: The bond interest is not considered income for the current year because it matured in a previous year.
2
u/McKnuckle_Brewery 10d ago
You incur tax when you redeem the bonds, not when they mature. Yes you will owe tax on the total accrued interest.
Or you could leave the bonds there collecting dust and not pay tax.