The harder part is the details. The right amount depends on whether you report interest annually or defer it, whether you received a Form 1099-INT, and whether an education exclusion or ownership rule applies. Non-U.S. residents who hold U.S. bonds often find this confusing, because the paperwork follows U.S. rules regardless of where you live.
This guide covers where the number goes, when to report it, how to fill in Schedule B, and which rules change the amount.
Key Takeaways
- Taxable savings bond interest goes on Form 1040 line 2b; line 2a is for tax-exempt interest.
- Form 1099-INT box 3 usually shows the interest, but annual reporters must also rely on their own records.
- Schedule B is required when taxable interest exceeds $1,500.
- Form 8815 can exclude qualifying education-related interest. It is an exclusion, not a deduction.
Where Does Savings Bond Interest Go on Form 1040?
The direct entry
On the 2025 Form 1040, line 2a is "Tax-exempt interest" and line 2b is "Taxable interest." Savings bond interest belongs on 2b. The 2026 draft keeps the same labels, but always check the final form for your year.
Do not use line 2a just because the U.S. government issued the bond. Savings bond interest is exempt from state and local income tax, but it is taxable federally.
What amount should you report?
Report the interest, not the principal or the full redemption proceeds. If you bought a bond for a set amount and cashed it for more, only the difference is income. The original purchase price comes back to you tax-free.
On Form 1099-INT, savings bond interest appears in box 3, "Interest on U.S. Savings Bonds and Treasury obligations." It is not included in box 1. Check the payer too:
- A bank or financial institution that cashed the bond issues the form.
- TreasuryDirect issues forms for account redemptions.
- Treasury mails forms for paper bonds redeemed through Treasury Retail Securities Services.
If the 1099-INT is missing or wrong
Taxable interest is reportable even without the form. Take these steps:
- Contact the payer. For TreasuryDirect accounts, go to ManageDirect > Manage My Taxes, pick the year, then 1099.
- Treasury mails paper-redemption forms by January 31, and duplicates can be requested from February 15.
- Review your own bond records to confirm the issue date, redemption date and interest.
- If the form is wrong, ask the payer for a corrected one.
When Do You Report Savings Bond Interest?
Annual versus deferred reporting
For Series EE and Series I bonds, IRS Publication 550 describes two methods:
| Method | What you report | When |
|---|---|---|
| Deferred (default) | All accumulated interest | At redemption, disposition or final maturity, whichever comes first |
| Annual | The yearly increase in redemption value | Every year, even without cash or a 1099 |
Most people defer, because no tax is due until the bond is cashed. Annual reporting spreads the tax over several years. Neither is universally better. It depends on your income now compared with when you expect to redeem.
Changing methods and avoiding double counting
- Deferred to annual: no IRS permission needed. You include all accrued, previously unreported interest in the year of the change.
- Annual to deferred: IRS permission is required. Publication 550 gives an automatic procedure using a statement headed "131," attached to your timely filed return for the change year.
Once you choose annual reporting, it applies to all EE and I bonds you own and any you acquire later.
If you reported interest in earlier years, the 1099-INT may still show the full amount. On Schedule B, list the full 1099-INT interest, enter a subtotal, then subtract a line labelled "U.S. Savings Bond Interest Previously Reported." Keep your old returns to prove it.
Filing-year checklist:
- Identify the bond series, issue date and redemption date
- Find prior returns if you reported annually
- Reconcile the 1099-INT against your records
- Keep all supporting documents
Ownership and inherited bonds
Who reports depends on who owns the bond for tax purposes:
- Co-owners, one paid: the person who supplied all the purchase money reports the interest.
- Co-owners, both paid: each reports in proportion to what they contributed.
- Child-registered bonds: the interest is the child's income, even if a parent paid.
For inherited bonds, Publication 559 applies. If the decedent reported annually, interest through death goes on the final return. If they deferred, the executor can elect to include all pre-death interest on the final return. Without that election, the beneficiary reports it.
In the IRS example, a $500 EE bond had accrued $94 at death and was redeemed for $1,000. With no election, the beneficiary reports $500 of interest. With the election, the final return reports $94 and the beneficiary $406.
How to Complete Form 1040 and Schedule B
Moving 1099-INT data to the return
- Collect every Form 1099-INT you received.
- Pick out the savings bond interest (box 3) and add your other taxable interest.
- Adjust for any interest you reported in earlier years.
- Enter the total on Form 1040 line 2b.
- Keep the forms with your records.
Schedule B is required when taxable interest is over $1,500. Education exclusion claims and nominee interest also trigger it, as does a financial interest in (or signature authority over) a foreign financial account. That last point matters if you live outside the United States.
On Schedule B Part I, list each payer and amount on line 1. Subtract any education exclusion on line 3 and attach Form 8815. Line 4 equals line 2 minus line 3, and it carries to Form 1040 line 2b.
Multiple forms and common traps
Keep payer detail when combining forms, and don't mix savings bond interest with bank interest or tax-exempt interest in your notes. Never do any of the following:
- Report the full redemption value
- Repeat interest you reported in earlier years
- Move the interest to capital gains or "other income" without a specific IRS rule
Paper, software and state returns
Tax software will ask about 1099-INT amounts. Check what it produces against your own records.
The recipient copy of the 1099-INT says "keep for your records," and the 2025 instructions require attachments for W-2G and 1099-R, not 1099-INT. Withholding on interest goes on line 25b.
On state and local returns, Treasury confirms that EE and I bond interest is exempt from state and local income tax. Check your state's subtraction rules and keep proof of the bond income.
Special Rules That Can Change the Amount
The education exclusion
You may exclude interest on qualifying EE or I bonds when you pay higher education expenses. Form 8815 covers it. The main conditions:
- Bonds issued after 1989, in your name or jointly with your spouse
- You were 24 or older before the bond was issued
- Qualified expenses paid in the same year as redemption, for you, your spouse or dependents
- Married filing separately makes you ineligible
- Room and board do not qualify
Income limits apply (modified AGI):
| Tax year | Filing status | Phase-out begins | No exclusion at |
|---|---|---|---|
| 2025 | Single, head of household | $99,500 | $114,500 |
| 2025 | Married filing jointly | $149,250 | $179,250 |
| 2026 | Single, head of household | $101,800 | $116,800 |
| 2026 | Married filing jointly | $152,650 | $182,650 |
If your expenses are lower than total proceeds, the excludable interest shrinks proportionally. In the IRS example, a couple redeemed $9,000 ($6,000 principal, $3,000 interest) and paid $7,650 in tuition. With $90,000 MAGI, they excluded $2,550 and owed tax on $450.
Exclusion is not a deduction
The Form 8815 result reduces taxable interest on Schedule B line 3. It is not an itemised deduction. Spending bond money on a personal expense does not make the interest deductible, since personal and family expenses are generally non-deductible.
Ownership and transfer situations
Inherited, jointly owned, gifted or reissued bonds each carry their own rules. Confirm who reported interest before and who owns the bond for tax purposes.
Common Mistakes and When to Get Help
Errors to avoid
- Entering the interest on line 2a instead of 2b
- Reporting principal as interest
- Reporting the same interest twice
- Ignoring an earlier annual-reporting election
- Assuming every government bond is tax-exempt
Keep these records with your return:
- Forms 1099-INT, Treasury or bank statements, and redemption confirmations
- Ownership records and prior returns
- For an education claim: expense receipts, bond serial number, issue date, face value and total proceeds
Fixing omissions
If you left interest off a return, or received a corrected 1099-INT after filing, you generally file Form 1040-X. A refund claim usually must be made within three years of filing or two years of paying tax, whichever is later.
If the IRS sends a CP2000 notice, it is not a bill. Respond by the date shown, agreeing or disagreeing with supporting documents. If you agree and have no other changes, follow the notice instructions rather than amending.
Inherited bonds, several years of unreported interest, cross-border ownership or conflicting forms are good reasons to get help.
VJM Global's CPAs and U.S.-compliant professionals prepare Form 1040 and 1040-NR returns and handle federal, state and local obligations across the United States.
Frequently Asked Questions
Where do I report savings bond interest on 1040?
Taxable savings bond interest generally goes on Form 1040 line 2b. Use Schedule B if your taxable interest exceeds $1,500 or another trigger applies. Check the forms for your tax year.
Do I need to report savings bonds on taxes?
Owning a bond is not a taxable event. The interest is. You report it annually if you chose that method, or at redemption, disposition or final maturity if you deferred.
Will I get a 1099 for savings bonds?
Usually, after you redeem or the bond matures. Holding alone does not produce one. If you report annually or the form is missing, use your own records.
How much tax will I pay on my EE savings bonds?
There is no separate savings bond tax rate. Tax depends on the taxable interest, your filing status, total income and the federal rates that apply.
Is the interest on bonds tax deductible?
No. You may be able to exclude qualifying interest using Form 8815 if you meet the bond, expense, filing status and income requirements. An exclusion differs from a deduction.
