THUMBS UP: Savings Bond Taxes

Tip:

In this era of paltry interest yields,US savings bonds, with their 2.66%yield, are looking pretty good as ameans to increase your retirementsavings. Another big plus for savingsbonds is the tax-deferred feature,which means you don't pay taxes onany of that interest until you cash inthe bonds. It also means that thosebonds that you've been accumulatingin your sock drawer can have big taxconsequences if you decide to turnthem into ready cash. A $25 E Bondthat cost you $18.75 back in 1975 isworth $120 today, and any amountover your purchase price is taxablewhen you cash the bond. Dosome tax planning before you startturning your bonds into cash. Thesavings bond calculator at www.publicdebt.treas.gov can help youfigure out just how much interestyou'll be taxed on.