Comments on: Are Series E Savings Bonds still earning interest?

by: Tom Adams

Mon, 15 Feb 2010 15:56:13 +0000

Kuei - Not only have your bonds stopped earning interest, they haven't earned interest for 10 years already.

The education deduction is not available for grandparents. There is nothing you can do to avoid paying the taxes.

However, had you cashed them when they stopped earning interest ten years ago and reinvested in new bonds, you would have earned more than the taxes you would have paid.

So although the taxes seem high, the truth is the tax is far less than loss you're taking by not earning any interest at all.

Tom Adams

by: kuei S Tu

Sun, 14 Feb 2010 04:29:58 +0000

My husband purchased some savings bond series E in 1969 - 70. I understand that they are no longer earning interest. If I redeem them, the taxes will be very high. I heard that if the bonds cashed for educational expenses (for my grandchildren), the interest will be non-taxible. Is it correct?

Could the bonds be converted to new bonds without paying taxes on the interest? Thank you for your help. Kuei

by: Tom Adams

Wed, 03 Jun 2009 21:05:15 +0000

Lauri - The cash to pay the taxes comes from the money you get when you redeem the bonds.

In other words, you cash the bonds and save back what you need to pay the tax on the interest. Since you don't need the money now, you reinvest what's left in new Savings Bonds.

The worst thing you can do is not cash the bonds. That's just a free loan to the government.

Tom Adams

by: LAURI ERNST

Tue, 02 Jun 2009 16:59:38 +0000

I have several $1,000 E bonds ..o2/1977.they are in my children's name and mine. i know they have expired but i did not know that i had to redeem them or pay a penalty. How can i best handle this situation as i cannot afford to cash the bonds myself and pay the interest as i am 87 and now a widow. i do not need the money right now. Could you e-mail me a suggestion. Thank you. L.Ernst

by: Tom Adams

Fri, 06 Feb 2009 16:19:11 +0000

Steve - As far as I know, what you describe isn't possible. What I suspect you actually did was send the bond in to a Federal Reserve bank, as described here, with instructions to deposit the proceeds in your TD account.

If that's the case, you'll get the 1099 from the Federal Reserve.

If you really did send the bond to TreasuryDirect and they redeemed a Series E bond for you like this (a Series E can't be converted to an electronic bond), that's actually pretty big news. They've never said they'd do that. And if they did, it sounds like their processes aren't mature, since they didn't get the interest on your 1099.

Tom Adams

by: Steve

Thu, 05 Feb 2009 18:04:30 +0000

thanks Tom for the reply.

I redeemed them through TreasuryDirect, not a bank. My credit union does not buy or sell savings bonds, and none of the local banks in town would cash a bond over $1000 for someone without an account. I didn't want to open up an account just to cash them, so that's why I sent them (via registered mail) and cashed them directly with TD. They converted them into a CofI account, I fiddled with 4 week T-bills for a while, then just took all the cash out. So to be more accurate my 1099 is not entirely blank, it has about $10 in interest from the T-Bill activity, but none of the original $5k+ paper-to-cash conversion.

Seems to me I should probably call/write to TreasuryDirect and find out why my 1099 is wrong then?

Much thanks again.