The National Directory of Certified Public Accountants

Ask A CPA - Interest Income

Federal EE And I Bonds

Interest is earned over 30 years. You do not have to report the interest income until you cash in the bond or it reached its final maturity, whichever comes first. When you do the interest is subject to federal income tax but exempt from state and local tax. You cannot cash the bond in until 6 months of ownership. If you cash it in after you have owned it for less than five years you will forfeit 3 months of interest. The Bureau of the Public Debt announced today that as of January 1, 2012, paper savings bonds will no longer be sold at financial institutions. This action, which supports the U.S. Department of the Treasury's goal to increase the number of electronic transactions with citizens and businesses, will save American taxpayers approximately $70 million over the first five years. But savings bonds, introduced in 1935, are not going away. Electronic savings bonds in Series EE and I will remain available through purchase in TreasuryDirect®, a secure, web-based system operated by Public Debt – where investors have been purchasing savings bonds, available 24/7, since 2002.

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