Step-by-Step Guide- How to Report Savings Bond Interest on Your Tax Return

How do I report savings bond interest on tax return?

Reporting savings bond interest on your tax return can be a straightforward process, but it’s important to understand the rules and guidelines set by the Internal Revenue Service (IRS). Savings bonds, also known as United States Savings Bonds, are popular investments for individuals looking to save money for the future. These bonds are issued by the U.S. Treasury and can be purchased at a face value lower than their future redemption value. The interest earned on these bonds is tax-deferred, meaning you won’t pay taxes on the interest until you redeem the bond or it reaches its final maturity date.

To report savings bond interest on your tax return, follow these steps:

1. Gather necessary information: Before you begin, you’ll need to gather the following information for each savings bond you own:
– The serial number and issue date of the bond
– The face value of the bond
– The interest earned on the bond for each year it was held

2. Calculate the interest earned: Use the interest rate and the number of days the bond was held to calculate the interest earned for each year. The IRS provides a savings bond interest calculator on their website to help you with this calculation.

3. Report the interest on Form 1040: Once you have calculated the interest earned, report it on Form 1040, Line 8b. If you are using Form 1040-SR (for seniors), report the interest on Line 9b.

4. Attach Form 8815: If you earned interest on Series EE or Series I savings bonds issued after 1989, you must complete and attach Form 8815, “Savings Bond Interest Report,” to your tax return. This form will help you determine if you are eligible for the non-refundable tax credit for interest on Series EE and I savings bonds.

5. Claim the tax credit (if applicable): If you are eligible for the tax credit, complete Form 8815 and enter the amount on Line 40 of Form 1040. The tax credit can be up to $1,000 per year, depending on your income.

6. Keep records: It’s essential to keep records of your savings bonds, including the serial numbers, issue dates, and interest earned each year. This information will be helpful if you need to verify your bond interest or if you are audited by the IRS.

Remember that the interest on savings bonds is taxable, even though it is tax-deferred. By following these steps, you can ensure that you accurately report the interest earned on your savings bonds and take advantage of any tax credits you may be eligible for. For more information or assistance, consult a tax professional or the IRS website.