How to best deal with tax on old IBonds
How to best deal with tax on old IBonds
We have 3 10,000 IBonds bought in May 2001 with a 3pct base rate.
There are going to be some serious taxes owed upon maturity.
I am assuming it would be wise to cash one out in Dec 2030 to lessen the tax hit.
Any other thoughts on this ?
I know it is 9 years out but I am in the process of writing a directive or plan in case I am no longer here.
Thanks
There are going to be some serious taxes owed upon maturity.
I am assuming it would be wise to cash one out in Dec 2030 to lessen the tax hit.
Any other thoughts on this ?
I know it is 9 years out but I am in the process of writing a directive or plan in case I am no longer here.
Thanks
K.I.S.S........so easy to say so difficult to do.
Re: How to best deal with tax on old IBonds
Congrats... that's a great problem to have. I know I wish I had more IBonds from when the base rate was in that range.
You can certainly look at cashing in 1 a year to spread the hit out... or 1 on 2030 and 2 in 2031... and the good news is it won't impact your state taxes.
Another path, but complicated, esp if you are leaving instructions, is to start accruing the interest now (a one time hit in the yer you start) and keep accruing. That will spread the hit out. Of course, you have to do that for all savings bonds you hold. Where it can get messy is if you pass and the person handling things doesn't know you were accruing. the 1099-INT that will come when you cash them in shows all the interest, and you have to back out what you've previously accrued. If someone doesn't know that, and has kept up with reporting the accruals, they may pay tax on interest you've already reported and paid tax on
Mike
You can certainly look at cashing in 1 a year to spread the hit out... or 1 on 2030 and 2 in 2031... and the good news is it won't impact your state taxes.
Another path, but complicated, esp if you are leaving instructions, is to start accruing the interest now (a one time hit in the yer you start) and keep accruing. That will spread the hit out. Of course, you have to do that for all savings bonds you hold. Where it can get messy is if you pass and the person handling things doesn't know you were accruing. the 1099-INT that will come when you cash them in shows all the interest, and you have to back out what you've previously accrued. If someone doesn't know that, and has kept up with reporting the accruals, they may pay tax on interest you've already reported and paid tax on
Mike
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Re: How to best deal with tax on old IBonds
While I'm a huge fan of I Bonds, I'm not a fan or TD. However, having said that, you may want to consider converting your paper bonds to electronic and then redeeming less than $10k per year for a number of years to spread the tax burden out over a longer period than three years.hoops777 wrote: ↑Fri May 27, 2022 10:44 am We have 3 10,000 IBonds bought in May 2001 with a 3pct base rate.
There are going to be some serious taxes owed upon maturity.
I am assuming it would be wise to cash one out in Dec 2030 to lessen the tax hit.
Any other thoughts on this ?
I know it is 9 years out but I am in the process of writing a directive or plan in case I am no longer here.
Thanks
Best Regards - Mel |
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Re: How to best deal with tax on old IBonds
Thanks for the suggestions.
When you think about it, IBonds do not keep up with inflation because you get hammered by the taxation at the end.
When you think about it, IBonds do not keep up with inflation because you get hammered by the taxation at the end.
K.I.S.S........so easy to say so difficult to do.
Re: How to best deal with tax on old IBonds
I’m thankful to have interest income to pay taxes. What’s the alternative? Don’t have interest income at all?
If you plan to retire early at 8 year make, you should be able to pay taxes at lower bracket.
Time is the ultimate currency.
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Re: How to best deal with tax on old IBonds
Not all that different than most of the other bonds in my pre-tax retirement accounts!
But seriously, it's true that "these keep up with inflation!" excitement is dulled when taxes are considered. Now whenever I discuss I-bond with others I'm always stating that 0% I-bonds are guaranteed to "scale with" or "track" inflation but potentially heavily mitigated by taxes upon cashes. That said, taxes did not keep me from maxing out my allotment this year.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
Re: How to best deal with tax on old IBonds
The alternative would be to have less money.
You don't have to cash out the full amount at once. You can do partial redemptions. They prorate the interest based on the amount of principal being withdrawn.
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Re: How to best deal with tax on old IBonds
Do you have kids heading to college? If your income is below the limit and the bonds were parent purchased, they may be cashed to pay tuition and fees for parent, parent's spouse or kids.
Who Can Take the Exclusion
You can take the exclusion if all five of the following apply:
You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
Your filing status is any status except married filing separately.
Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
You were 24 or older before your savings bonds were issued.
Savings Bonds That Qualify for the Exclusion
To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.
Who Can Take the Exclusion
You can take the exclusion if all five of the following apply:
You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
Your filing status is any status except married filing separately.
Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
You were 24 or older before your savings bonds were issued.
Savings Bonds That Qualify for the Exclusion
To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.
Bogle: Smart Beta is stupid
Re: How to best deal with tax on old IBonds
Importantly, is there anyone in your family you’d like to support educationally? Elementary through grad school? Any folks with a disability?
51% US / 34% ex-US / 15% “bond”
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Re: How to best deal with tax on old IBonds
These are the MAGI limits from the 2021 form. As always, this version of MAGI may not be the same as MAGIs used for other tax purposes "see instructions".Jack FFR1846 wrote: ↑Fri May 27, 2022 1:17 pm Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
If line 9 is $98,200 or more if single, head of household, or qualifying widow(er); or $154,800 or more if married filing jointly, stop. You cannot take the exclusion.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
Re: How to best deal with tax on old IBonds
I have a similar amount of those same iBonds. Most likely I will just redeem them and use them for my living expenses and try to not have much other taxable income that year other than RMDs and dividends in a taxable account.
You are over thinking this.
Your heirs tax situation 9 years from now is likely even more unpredictable than yours.
You could also be in a nursing home then and have very high itemized deductions so that you would not need to pay taxes when you redeem them.
I am just planning to just review it a year before they mature to see if cashing some of them a year early makes sense.
You can also roll iBonds into a 529 for grandkids or great grandkids and not pay taxes on it.Jack FFR1846 wrote: ↑Fri May 27, 2022 1:17 pm Do you have kids heading to college? If your income is below the limit and the bonds were parent purchased, they may be cashed to pay tuition and fees for parent, parent's spouse or kids.
Who Can Take the Exclusion
You can take the exclusion if all five of the following apply:
You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
Your filing status is any status except married filing separately.
Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
You were 24 or older before your savings bonds were issued.
Savings Bonds That Qualify for the Exclusion
To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.
That is not done a lot so a lot of people do not realize that it is possible.
This is something that I will consider doing when they are close to maturity.
Re: How to best deal with tax on old IBonds
I did not know that. My grandsons are 3 and 7 so these are for them anyway. 529 sounds like a great option.Watty wrote: ↑Fri May 27, 2022 2:04 pmI have a similar amount of those same iBonds. Most likely I will just redeem them and use them for my living expenses and try to not have much other taxable income that year other than RMDs and dividends in a taxable account.
You are over thinking this.
Your heirs tax situation 9 years from now is likely even more unpredictable than yours.
You could also be in a nursing home then and have very high itemized deductions so that you would not need to pay taxes when you redeem them.
I am just planning to just review it a year before they mature to see if cashing some of them a year early makes sense.
You can also roll iBonds into a 529 for grandkids or great grandkids and not pay taxes on it.Jack FFR1846 wrote: ↑Fri May 27, 2022 1:17 pm Do you have kids heading to college? If your income is below the limit and the bonds were parent purchased, they may be cashed to pay tuition and fees for parent, parent's spouse or kids.
Who Can Take the Exclusion
You can take the exclusion if all five of the following apply:
You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
Your filing status is any status except married filing separately.
Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
You were 24 or older before your savings bonds were issued.
Savings Bonds That Qualify for the Exclusion
To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.
That is not done a lot so a lot of people do not realize that it is possible.
This is something that I will consider doing when they are close to maturity.
K.I.S.S........so easy to say so difficult to do.
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Re: How to best deal with tax on old IBonds
I believe Randy Moss said it best back in 2005 "Straight cash homie"
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Re: How to best deal with tax on old IBonds
Actually, when it comes up to after-tax results, the older I Bonds, with fixed rates of up to 3.6% over and above inflation, obviously did (and continue to do) a very nice job dealing with inflation.
Best Regards - Mel |
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Re: How to best deal with tax on old IBonds
“ You can also roll iBonds into a 529 for grandkids or great grandkids and not pay taxes on it.”
Not likely unless the grandkids or great grand kids qualify as your dependents, and of course you need to meet other requirements.
Not likely unless the grandkids or great grand kids qualify as your dependents, and of course you need to meet other requirements.
Re: How to best deal with tax on old IBonds
IANAL or a tax advisor... But others have reported if you are willing to jump through some hoops it might be possible. https://www.kiplinger.com/article/taxes ... ation.html
Re: How to best deal with tax on old IBonds
Another alternative would be to make a large charitable donation in 2031, to get a deduction in what would otherwise be an unusually high tax bracket. For example, you could draw all your living expenses from your IRA in 2030, and make a Qualified Charitable Distribution for your entire RMD in 2031.
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Re: How to best deal with tax on old IBonds
Yikes, that's a twisted knot of a strategy. Temporarily make the grandparent the 529 beneficiary...then have the GP cash the bonds and contribute to "their" 529...then change the beneficiary back to the grandchild. I suspect one day that strategy will end up in tax court! I'm saying that playfully. But it certainly seems like a risky strategy on the face of it, but I have no idea if it's been validated with an IRS stamp of approval of sorts at any point.SnowBog wrote: ↑Fri May 27, 2022 4:24 pmIANAL or a tax advisor... But others have reported if you are willing to jump through some hoops it might be possible. https://www.kiplinger.com/article/taxes ... ation.html
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
Re: How to best deal with tax on old IBonds
After a little more thought, if I am still alive and kicking in 9 years, I will happily pay the taxes if the 529 deal does not work.
I guess it is a bit unfair to complain on paying tax on something that compounded for 30 years.
I guess it is a bit unfair to complain on paying tax on something that compounded for 30 years.
K.I.S.S........so easy to say so difficult to do.
Re: How to best deal with tax on old IBonds
I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Re: How to best deal with tax on old IBonds
You should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
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Re: How to best deal with tax on old IBonds
I can think of a whole lot of other problems to have far worse than my I-bond accrued interest!
That doesn't mean I won't whine about it.
By the time the bonds mature in 2030 and 2031 I'll be in RMD mode.
Broken Man 1999
That doesn't mean I won't whine about it.
By the time the bonds mature in 2030 and 2031 I'll be in RMD mode.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Re: How to best deal with tax on old IBonds
How would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
Re: How to best deal with tax on old IBonds
There are various tools to determine the value of your bonds at any point in time. However, your question makes its own case that the bond should be cashed in during the year they mature. Otherwise, it just makes a big tax mess.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
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Re: How to best deal with tax on old IBonds
I would say that it should be auto-redeemed. TreasuryDirect should send you a check and the associated 1099-INT the following spring if the bond has matured.samsoes wrote: ↑Fri May 27, 2022 9:36 pmThere are various tools to determine the value of your bonds at any point in time. However, your question makes its own case that the bond should be cashed in during the year they mature. Otherwise, it just makes a big tax mess.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
Re: How to best deal with tax on old IBonds
TD does auto redeem electronic bonds at maturity, yes. But the question embedded in the quoted posts above refer to paper bonds.tj wrote: ↑Fri May 27, 2022 9:46 pmI would say that it should be auto-redeemed. TreasuryDirect should send you a check and the associated 1099-INT the following spring if the bond has matured.samsoes wrote: ↑Fri May 27, 2022 9:36 pmThere are various tools to determine the value of your bonds at any point in time. However, your question makes its own case that the bond should be cashed in during the year they mature. Otherwise, it just makes a big tax mess.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. |
(Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
Re: How to best deal with tax on old IBonds
For electronic bonds - they essentially do. Well, except send the 1099 - you still need to login and get that...tj wrote: ↑Fri May 27, 2022 9:46 pmI would say that it should be auto-redeemed. TreasuryDirect should send you a check and the associated 1099-INT the following spring if the bond has matured.samsoes wrote: ↑Fri May 27, 2022 9:36 pmThere are various tools to determine the value of your bonds at any point in time. However, your question makes its own case that the bond should be cashed in during the year they mature. Otherwise, it just makes a big tax mess.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
But for paper bonds - you must physically redeem them. Or alternatively convert to electronic so they'll be automatically redeemed...
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Re: How to best deal with tax on old IBonds
OP....here is an interesting tidbit I just learned. It may not be useful to you, but who knows?
"The IRS lets you avoid paying taxes on interest earned by Series EE and Series I savings bonds when you redeem them if you use the money toward qualified higher education costs for yourself, your spouse, or any of your dependents."
"The IRS lets you avoid paying taxes on interest earned by Series EE and Series I savings bonds when you redeem them if you use the money toward qualified higher education costs for yourself, your spouse, or any of your dependents."
Re: How to best deal with tax on old IBonds
The amount would have been the same as you received in the year following maturity because they stopped earning interest. These should have been reported as 2020 income. You don’t get to choose the year after the bond matures.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: How to best deal with tax on old IBonds
But it sounds like that's exactly what the bondholder chose to do. If they report the bond interest on a tax return that's different from the year of the 1099, it could cause them issues.Gill wrote: ↑Sat May 28, 2022 4:59 amThe amount would have been the same as you received in the year following maturity because they stopped earning interest. These should have been reported as 2020 income. You don’t get to choose the year after the bond matures.tj wrote: ↑Fri May 27, 2022 9:01 pmHow would you even know the amount of interest if you didn't sell it and receive the 1099?Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
Gill
Re: How to best deal with tax on old IBonds
Your approach makes no sense. The interest is correctly reportable in the year of maturity. The 1099 is irrelevant and the tax preparer can simply net it out by showing the 1099 interest and then eliminating it by showing negative interest and explaining it is reportable in a different year. If your theory held, you could simply hold the bonds past maturity and then redeem them in a year favorable to you. 1099's don't control anything. Quite simply, interest on maturing savings bonds is reportable in the year of maturity regardless of what else the bond holder does.
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: How to best deal with tax on old IBonds
As someone who audited several tax returns, the tax preparer and irs are going to have any knowledge of such a bond. They clearly do not have the right mechanisms in place on these paper I bonds to actually enforce that law.Gill wrote: ↑Sat May 28, 2022 9:13 amYour approach makes no sense. The interest is correctly reportable in the year of maturity. The 1099 is irrelevant and the tax preparer can simply net it out by showing the 1099 interest and then eliminating it by showing negative interest and explaining it is reportable in a different year. If your theory held, you could simply hold the bonds past maturity and then redeem them in a year favorable to you. 1099's don't control anything. Quite simply, interest on maturing savings bonds is reportable in the year of maturity regardless of what else the bond holder does.
Gill
Re: How to best deal with tax on old IBonds
In other words, you are saying to ignore the tax laws because you probably won't be caught?tj wrote: ↑Sat May 28, 2022 9:21 amAs someone who audited several tax returns, no tax preparer is going to ask for 30 years of bank statements to determine savings bond interest, and the IRS isn't going to know either unless they happen to be looking at bank statements for some other reason. They clearly do not have the right mechanisms in place on these paper I bonds to actually enforce that law.Gill wrote: ↑Sat May 28, 2022 9:13 amYour approach makes no sense. The interest is correctly reportable in the year of maturity. The 1099 is irrelevant and the tax preparer can simply net it out by showing the 1099 interest and then eliminating it by showing negative interest and explaining it is reportable in a different year. If your theory held, you could simply hold the bonds past maturity and then redeem them in a year favorable to you. 1099's don't control anything. Quite simply, interest on maturing savings bonds is reportable in the year of maturity regardless of what else the bond holder does.
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: How to best deal with tax on old IBonds
No. But that's the reality. There are all kinds of tax laws that taxpayers are ignorant of.Gill wrote: ↑Sat May 28, 2022 9:23 amIn other words, you are saying to ignore the tax laws because you probably won't be caught?tj wrote: ↑Sat May 28, 2022 9:21 amAs someone who audited several tax returns, no tax preparer is going to ask for 30 years of bank statements to determine savings bond interest, and the IRS isn't going to know either unless they happen to be looking at bank statements for some other reason. They clearly do not have the right mechanisms in place on these paper I bonds to actually enforce that law.Gill wrote: ↑Sat May 28, 2022 9:13 amYour approach makes no sense. The interest is correctly reportable in the year of maturity. The 1099 is irrelevant and the tax preparer can simply net it out by showing the 1099 interest and then eliminating it by showing negative interest and explaining it is reportable in a different year. If your theory held, you could simply hold the bonds past maturity and then redeem them in a year favorable to you. 1099's don't control anything. Quite simply, interest on maturing savings bonds is reportable in the year of maturity regardless of what else the bond holder does.
Gill
Gill
Re: How to best deal with tax on old IBonds
Thanks. Noted.Gill wrote: ↑Fri May 27, 2022 5:48 pmYou should have reported the interest as 2020 income, the year of maturity. What you did was incorrect.SR II wrote: ↑Fri May 27, 2022 5:00 pm I had several thousand dollars in paper EE-bonds that my mom bought over 30 years ago with me as the co-owner. Since they matured in 2020 and I didn't want to go into a bank branch at that time, I waited until 2021 to cash them all in at once. I just sucked it up and paid the taxes on the interest. Done.
Gill
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Re: How to best deal with tax on old IBonds
If I have some 2000 ibonds that I will have to pay taxes in 2030 at age 69. To avoid paying taxes on them, Can my DW and I give them to our kids who then can roll them over to a 529 plan for their kids if my kids income allows?
Re: How to best deal with tax on old IBonds
Treasury Direct indicates one of the events requiring you to pay income tax is "you give up ownership of the bond and the bond is reissued".Parkinglotracer wrote: ↑Mon May 30, 2022 6:46 am If I have some 2000 ibonds that I will have to pay taxes in 2030 at age 69. To avoid paying taxes on them, Can my DW and I give them to our kids who then can roll them over to a 529 plan for their kids if my kids income allows?
https://www.treasurydirect.gov/indiv/re ... htm#report
Appears the answer to your question is "no".
Re: How to best deal with tax on old IBonds
I didn't think you could do this. I know you could recognize the interest every year from the beginning, but can you report all of the accrued interest in one year and then pay by year after that?fabdog wrote: ↑Fri May 27, 2022 10:50 am Congrats... that's a great problem to have. I know I wish I had more IBonds from when the base rate was in that range.
You can certainly look at cashing in 1 a year to spread the hit out... or 1 on 2030 and 2 in 2031... and the good news is it won't impact your state taxes.
Another path, but complicated, esp if you are leaving instructions, is to start accruing the interest now (a one time hit in the yer you start) and keep accruing. That will spread the hit out. Of course, you have to do that for all savings bonds you hold. Where it can get messy is if you pass and the person handling things doesn't know you were accruing. the 1099-INT that will come when you cash them in shows all the interest, and you have to back out what you've previously accrued. If someone doesn't know that, and has kept up with reporting the accruals, they may pay tax on interest you've already reported and paid tax on
Mike
Edited to add: I found the regulations. You can change the tax reporting method.
masha12