Owners of Series EE and Series I savings bonds generally do not have to report the interest on a tax return until the bonds mature or are cashed, though they can choose to report it every year, the IRS says. The agency’s Topic No. 403, last updated Oct. 7, puts the choice plainly: “You can elect to include the interest in income each year.” Anyone who does nothing waits, and the tax comes due later.
Paper bonds in a drawer and older Series E bonds fall under the same kind of rule, since the IRS’s savings bond answer covers Series E, EE and I together. The interest builds up inside the bond, and unless the owner elects to report it, the IRS does not count it as income on the return year by year.
The question for a bond owner is which method they have been using. Someone who has never reported any interest is on the wait-until-cashed track, and someone who has been adding it to every return has already paid tax on part of it. Either way, the answer shapes the return for the year a bond is cashed, so it is worth knowing before the redemption.
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When does the tax on the interest come due?
An IRS tax-law FAQ on savings bonds, updated Sept. 23, says: “In general, you must report the interest in income in the taxable year in which you redeemed the bonds.” The same answer carves out interest that was already included in income in an earlier year, which is what happens when an owner has reported yearly.
Topic 403 adds that interest is also taxable when the bonds are redeemed or disposed of, not only when they reach maturity. The result is that a lump of accumulated interest lands in a single tax year for anyone who waited, and that year’s return has to carry all of it.
Where does the interest go on the return?
The IRS says that if total taxable interest for the year is over $1,500, the filer has to complete Schedule B and attach it to Form 1040 or 1040-SR. At $1,500 or less, and with no other reason to file Schedule B, the savings bond interest goes on the “Interest” line of the return with other interest.
Topic 403 also says that interest of $10 or more should come with a Copy B of Form 1099-INT or Form 1099-OID from the payer. It adds that all taxable and tax-exempt interest has to be reported even when no 1099-INT arrives, so a missing form does not make the interest disappear.
What if the bonds paid for college?
Interest on Series EE and Series I bonds issued after 1989 “may be excluded from income when used to pay for qualified higher educational expenses,” according to Topic 403, as long as the other requirements of the Education Savings Bond Program are met. The expenses can be for the owner, a spouse or a dependent, the IRS says.
The amount that can be excluded is worked out on Form 8815, which is for taxpayers who cashed Series EE or I bonds issued after 1989 during the tax year. The interest is then reported on Schedule B, with Form 8815 attached to it.
What should be sorted out before a bond is cashed?
The IRS’s own guidance points to a short list of questions that decide how a redemption shows up on the return:
- Whether the bonds are Series E, EE or I, the kinds the IRS’s savings bond answer covers.
- Whether any of the interest was already reported in an earlier year, which the IRS says takes it out of the year of redemption.
- Whether total taxable interest for the year is over $1,500, which brings in Schedule B.
- Whether the money pays for college costs for the owner, a spouse or a dependent, which can open the Form 8815 exclusion for bonds issued after 1989.
Anyone who cashes bonds in a year with a large amount of accumulated interest should expect it all to land on that year’s return, since that is the year the IRS says the interest is reported.
Where do changes of method and inherited bonds come in?
The IRS’s Publication 550 for 2025 returns has separate sections on the choice to report interest each year, on changing from one reporting method to the other and on how interest is handled when a bond owner has died, depending on whether the decedent reported yearly or postponed reporting. It also covers co-owners, transfers of ownership and a child as the only owner. Form 3115, the application for a change in accounting method, appears in the publication’s list of useful items.
The rules for switching methods and for inherited bonds sit in those Publication 550 sections, which is where owners of old bonds, or heirs to them, should look before filing.
Cashing old savings bonds and not sure where the money goes next?
Interest that built up for years lands on a single year’s return when a bond is cashed, and the cash that comes back often drops into whatever account is handy. A big redemption is also when a low-paying balance costs the most.
Make Your Savings Pay You is an 11-page guide to insured high-yield savings, CDs, Treasury bills from $100 and I bonds whose rate adjusts with inflation every six months. It opens with a 60-second scan of what the cash earns now and ends with a ladder to copy, so money comes due on a schedule. The reporting choice is made on the tax return; the guide covers where the cash goes after the bond is cashed.
Get the safe-savings guide for where cashed-bond money can go →
This article was produced with AI assistance and edited for accuracy against the sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
