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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13577
Experience:  15years with H & R Block. Divisional leader, Instructor
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My mother has some I bonds that she would like to redeem an

Customer Question

My mother has some I bonds that she would like to redeem an put into my savings account. The amount is about $35,000. She makes about $110K annually. I understand she will have to pay taxes on the interest of the bonds I wanted to get a rough number or percentage she would have to pay on those bonds.
Submitted: 3 years ago.
Category: Tax
Expert:  Robin D. replied 3 years ago.

Robin D. :

Hello and thank you for using Just Answer,
You are correct the interest that the savings bonds earn is subject to federal income tax, but not to state or local income tax. The interest will be added to her regular income and then taxed at her regular tax of tax.
If your mother files single then the following is the list for tax rates for single filers:

  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $87,850, plus
  • 28% on taxable income over $87,850 to $183,250, plus
  • 33% on taxable income over $183,250 to $398,350, plus
  • 35% on taxable income over $398,350 to $400,000, plus
  • 39.6% on taxable income over $400,000.

Robin D. :

If you mother has no other income then the interest would be taxable under the % listed above for the amount.

Robin D. :

Please remember too that if your mother gives you the money from the bond and it is more than the yearly limit on gifts ($14,000 to any one person right now) she will need to file the Form 709 to report the gift to you.

JACUSTOMER-g60dl8ao- :

So she wont have to pay tax interest on the bonds by themselves but it will be added to to her income.

Robin D. :

That is correct. The interest on teh bond is what will be taxable and that amount would need ot be shown on her return.

JACUSTOMER-g60dl8ao- :

So when the money is deposited would you recommend saving some of it just in case she has to pay taxes on the bonds.

Robin D. :

Yes I would. The 1099INT will be issued to her after Jan following the year she redeems. If thi sis done now then 2014 she will be sent the 1099INT with the interest amount.

Robin D. :

Most people defer reporting the interest, putting it off until they are filing a federal income tax return for the year in which they receive what the bond is worth including the interest. You will want to check to make sure your mother deferred reporting the interest too.

Robin D. :

I hope this CHAT was helpful.

Robin D. :

My goal is to give you excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic request me again.

Robin D. :

Let me know if you need more info on the redeeming the bond.

Robin D. :

Did you have another question about the bond and tax on the interest?

Expert:  Robin D. replied 3 years ago.
If you need to calculate the interest you can use the following Treasury site where a calculator is available

http://www.treasurydirect.gov/BC/SBCPrice