How much should I hold back for taxes on my Savings Bond interest income?
Thursday, February 17th, 2005
Categorized as: Cashing in US Savings Bonds • Savings Bond taxes
I have some Savings Bonds reaching final maturity. I'd like to redeem them and reinvest in new Savings Bonds. How much of the interest income should I hold back for taxes rather than reinvesting?
Tom's response
Good thinking! Many people forget to hold back part of the redemption proceeds for taxes. Then they don't have any cash to the pay the tax they owe.
The percentage you'll need to hold back depends on your filing status and taxable income. Taxable income is less than your total income. It's your total income less deductions and exemptions. Look for a line on your tax return labeled Taxable Income (it's line 42 on the standard 1040 form).
Look up your taxable income - using the column for the year you'll cash the bonds - in the table for your filing status on our federal income tax brackets page. The percentage you need to hold back is on the right.
For other investments, you'd also need to add on a few percentage points for state income tax, but that's not necessary here because Savings Bond interest isn't taxable at the state level.
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My mother died recently. My brother-in-law is the trustee. He has lied and has hidden assets. He denied knowing that my mother had set up a large Xerox trust fund. (His signature was on the origination papers.) He cleaned out her safty deposit box, which among other valubles, contained her savings bonds, which she bought regularly. He claims this box was empty except for $241. I know that he stole these savings bonds, and cashed them after my mother's death. I need to prove that he did, so that I can ask the court for "Discovery". Discovery will give me the right to ask banks for statements that will prove she had accounts that I know he is hiding. I found one of her bonds in a drawer. How can I find out who cashed these bonds and when they were cashed?
I would appreciate any help you could give me.
Thank you,
Billie Billyard
Hi Billie - in the right column on this page there's a place that says, "Ask the Treasury". Click that and ask your question of the Savings Bond folks, who will let you know if they can help.
Tom Adams
How much should I hold back for taxes on my Savings Bond interest income?
Hi Marge - the information you're looking for is at the top of this page. Is there something there you want clarified?
Tom Adams
If I cashed a $10,000 bond from my mother and recieved 12,147.10 for it, do i pay the on the $7,147 interest or the $2,147 interest above the face value of the bond?
Robin - nice try, but you pay tax on the difference between the redemption value of the bond and what it cost to begin with - which was $5,000 - not its face value.
Tom Adams