If I inherited U.S. Savings Bonds, is the interest taxable income?
It depends on how the deceased person reported the interest before death.
If the owner reported the interest each year prior to death, report the interest in the year of death like this:
Report interest earned after the date of death on your return.
Report interest earned up to the date of death on the deceased person's final return.
If the owner didn't report the interest each year prior to death, report the interest in 1 of these ways:
Split the interest between the deceased person's return and your return:
The executor or administrator should include all of the interest earned before the person's death on the final return.
The beneficiary -- in this case, you -- should report only the interest earned after the date of death on the return.
Report as income all of the interest earned before and after the person's death on your return. If you use the cash method of accounting, you can defer the interest until 1 of these, whichever is earlier:
You cash the bonds.
The bonds reach their date of maturity.
In the year you report the interest, you can deduct any federal estate tax you paid. This applies if you owed any tax for including part of the interest in the deceased person's estate.
The redemption values of U.S. Savings Bonds usually are available from:
Savings and loan institutions
Branches of the Federal Reserve Bank
To learn more, contact:
Bureau of the Public Debt
P.O. Box 1328
Parkersburg, WV 26106-1328
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This advice is for general information purposes only and may not apply to you. Every tax situation is different. This is not intended to be legal advice. Taxpayers should consult an H&R Block Tax Professional regarding their individual tax situation.