How Series HH Savings Bonds work

• Series H and HH bond overview
• Sample Series HH Savings Bond
• How to redeem Series H/HH savings bonds
• Series H/HH tax issues
• Treasury Internet Site for Series HH Savings Bonds

Series H and HH bond overview

New Series HH or Series H Savings Bonds are no longer issued, however, there are both H and HH bonds outstanding that are still earning interest.

Series HH Savings Bonds, as well as the older Series H Savings Bonds, feature current income. The interest they earn is paid to you twice a year, rather than added to the value of the bond, as with all other Savings Bonds. The payment is made in the anniversary month of the bond and six months later.

When they were available, the only way to obtain Series H/HH Savings Bonds was in exchange for Series E or EE Savings Bonds.

In addition to cash interest payments, a second major feature of Series HH and Series H Savings Bonds is that they allow you to continue to defer the income tax due on the interest earned by the E/EE bonds that you converted to H/HH bonds. This tax-deferral lasts until the H/HH Bonds are redeemed or stop earning interest.

The interest rate on H/HH bonds was set for ten years when you obtained the bond and is reset at the end of each ten-year period. Currently the new H/HH bond interest rate is a mere 1.5%.

includes an extensive analysis of 1.5% H/HH bonds. Many people are better off redeeming 1.5% bonds, paying the tax, and reinvesting in EE or I bonds. See the book for complete details.

H/HH bonds were issued at full face value (you paid $500 for a $500 bond). Series H/HH Savings Bonds were available in four denominations: $500, $1,000, $5,000, and $10,000.

Series H bonds were first issued in June 1952 and earn interest for 30 years. They were replaced by Series HH Savings Bonds in January 1980. Series HH bonds earn interest for 20 years.

You can have Series HH and Series H Savings Bond interest payments deposited directly into your bank account. Use the Treasury's Direct Deposit Sign Up Form, to initiate direct deposit.

Unlike other series of Savings Bonds, Series H/HH bonds don't have a three-month interest penalty when they are redeemed before five years.

Sample Series HH Savings Bond

How to redeem Series H/HH savings bonds

Financial institutions are sometimes reluctant to get involved in cashing Series H and Series HH bonds because they don't deal with them regularly. If this happens to you, print out a copy of the Treasury's Direct Depost Sign Up Form. Check the Redemption Payment box at the top of the form and fill out the section requesting your name and address.

Then take the form to your financial institution and have them help you fill in the bank routing section. Then ask them to certify your signature on the back of the bonds. Send the form and the certified bonds by registered mail to the Federal Reserve Bank that services your area.

To find out which one this is, enter your postal zip code in the form on the Treasury's who-to-contact page.

When you have to decide which Series HH bonds you will redeem, consider the interest rate each of your bonds is currently paying, how long each bond will pay that rate, and when each bond will mature. includes tables with all these details, as well as a rating for each issue date that will help you decide which bonds to redeem first.

Hidden interest rate penalty

An important issue when cashing Series H/HH bonds is that at redemption you don't receive any interest for the period from the last interest payment date to the redemption date.

To avoid paying what amounts to an interest-rate penalty, redeem Series H/HH bonds right after you receive an interest payment. Otherwise you can lose up to six-months worth of interest.

Series H/HH tax issues

On the face of a Series HH or Series H Savings Bond you'll see a section labeled deferred interest. When you redeem an HH bond, you receive the face value of the bond and both you and the IRS receive a 1099-INT tax form reporting the amount of deferred interest shown on the bond.

The amount shown on the 1099-INT is the interest from the Series E/EE bonds that were converted into Series H/HH bonds and never paid.

If you have a large investment in HH bonds, you also need to be aware of the deferred-tax time-bomb, which is discussed in detail in .

Treasury Internet Site for Series HH Savings Bonds

The Treasury internet site for Series HH and Series H Savings Bonds allows holders of these bonds to:

• view their accounts
• change their address
• request tax information
• the site is available
  • Monday-Friday, 8 am to 8 pm Eastern time
  • Saturday, 7am to 2:30pm Eastern time
  • excluding federal holidays