4.29 Deferring United States Savings Bond Interest
You do not have to make a special election on your tax return in order to defer the interest on Series EE or I savings bonds. You may simply postpone reporting the interest until the year you redeem the bond or the year in which it reaches final maturity, whichever is earlier. If you choose to defer the interest, you may decide in a later year to begin reporting the increase in redemption value each year as interest. You may also switch from annual reporting to the deferral method. These options are discussed in this section.
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Form 1099-INT When Savings Bond Is Cashed
When you cash in an EE or I bond, you receive Form 1099-INT that lists as interest the difference between the amount received and the amount paid for the bond. The form may show more taxable interest than you are required to report because you have regularly reported the interest or a prior owner reported the interest. Report the full amount shown on Form 1099-INT on Schedule B if you file Form 1040 or Form 1040A, along with your other interest income. Enter a subtotal of the total interest and then, on a separate line, reduce the subtotal by the savings bond interest that was previously reported and identify the reduction as “Previously Reported U.S. Savings Bond Interest.” The interest is exempt from state and local taxes.
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