Buying U.S. savings bonds is no longer a good deal because they have been restructured to lock in today's low rates. But don't dump your older savings bonds without checking their features. Here are five basic things to know about savings bonds:
Current rates
Currently issued Series EE bonds carry a fixed rate for the first 20 years of the 30-year life of the bond. For the remaining 10 years, the government may issue a new fixed rate. The current rate for newly issued EE bonds is 0.10 percent for 20 years. A new fixed rate will be set on May 1. For Series I bonds, the current 6-month rate is 0.74 percent; the current composite yield is 1.48 percent.
Savings bond values
Interest, based on the formula in place at the time the bond was purchased, continues to accrue until the bond reaches final maturity. Because of floating rates, the bond will likely be worth more than its face value at maturity. Go to SavingsBonds.com and use its savings bonds calculator and inventory forms to find out the value of older savings bonds.
Taxes on savings bonds
When the bonds are cashed in, federal income tax is due on the interest earned over the years. That income must be reported on your federal tax return (although not on your state return) — assuming that you did not report the accrued income annually.
Savings bonds for college
Bonds purchased in the name of the parent may be eligible for a tax-free redemption — if the bonds are used to pay for qualified college expenses. But there are parental income limits to qualify, currently phasing out at income above $76,000 on a single parent's return and $113,950 on a joint return.
Bond ownership
Savings bonds may have a single name, or a co-owner or a beneficiary — a maximum of two names. Upon the death of a "primary" owner, if a co-owner is listed on a paper bond, the co-owner will have full rights to the bond. If there is no co-owner or beneficiary listed, it will go into the estate of the person who died.
TERRY SAVAGE
