Minimizing taxes on EE Savings Bonds

You can bequeath them to a charity in your will, but that's probably not what you had in mind, and it would not be great financial planning since they would likely sit there not earning interest for several decades first.

I'd just pay the tax. At least they're not subject to state income tax.

I know that one can roll them into a 529 account tax-free, but am not sure if your age would come into play there, too. Then you could just use the 529 to pay for your kids tuition tax-free.

Contributions to a QTP (529) must be in cash or cash equivalent (check, money order). One can not contribute savings bonds. The only rollovers allowed are those that come from another QTP or go from a QTP to an ABLE account.

Nope, same problem, the bonds aren't eligible if issued before you were 24.

See IRS Publication 970, Chapter 10.

According to Publication 970, proceeds from savings bonds can usually be contributed to a QTP tax-free:

Of course, one would be contributing the proceeds of the sale of savings bonds, not the bonds themselves. This would normally qualify for income deferral/exclusion.

Maria U. Ku, CPA Oakland, CA

That 24 year old rule is very frustrating as it penalizes me for having even a modest amount of financial foresight in my early 20s (LOL). The only other thing I could think of is adding my (adult) sibling on a co-owner of the bonds in the immediate future, having him cash the bonds and so he receives the 1099INT form in his name, and have him pay the taxes. He's in a much lower tax bracket than me. But, I'm not sure that is even possible.

That's not a rollover. It's a cash contribution. Whether or not one can exclude the interest income on maturity has already been discussed.

Anthony,

If you add your sibling to the title, make sure the current value of bonds transferred does not exceed the $15k annual gift exclusion amount. Also, if your brother is going to be cashing out, why don't he contribute the proceeds to a 529 fbo your-college-student-kid, and so not pay tax on the interest, then pay for your kids tuition from that 529?

Maria U. Ku, CPA Oakland, CA

Unfortunately, you owe income taxes on your current (2019) tax return for the matured 1989 savings bonds, even though you haven't redeemed them.

From IRS Pub 550: Series EE bonds issued in 1989 matured in 2019. If you have used method

• you redeem (cash in) the bond and receive what the bond is worth, including the interest,or ...
• the bond stops earning interest because it has reached final maturity
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