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H And R Block Taxes

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H And R Block Taxes

H and r block taxes Publication 530 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. H and r block taxes Tax questions. H and r block taxes Useful Items - You may want to see: What's New Simplified method for business use of home deduction. H and r block taxes  The IRS now provides a simplified method to determine your expenses for business use of your home. H and r block taxes For more information, see the Instructions for Schedule C (Form 1040). H and r block taxes Reminders Future developments. H and r block taxes  For the latest information about developments related to Publication 530, such as legislation enacted after it was published, go to www. H and r block taxes irs. H and r block taxes gov/pub530. H and r block taxes Residential energy credits. H and r block taxes  You may be able to take a credit if you made energy saving improvements to your home located in the United States in 2013. H and r block taxes See Form 5695, Residential Energy Credits, for more information. H and r block taxes Home Affordable Modification Program (HAMP). H and r block taxes  If you benefit from Pay-for-Performance Success Payments, the payments are not taxable under HAMP. H and r block taxes Hardest Hit Fund and Emergency Homeowners' Loan Programs. H and r block taxes  If you are a homeowner who received assistance under a State Housing Finance Agency Hardest Hit Fund program or an Emergency Homeowners' Loan Program, you may be able to deduct all of the payments you made on your mortgage during the year. H and r block taxes For details, see Hardest Hit Fund and Emergency Homeowners' Loan Programs under What You Can and Cannot Deduct, later. H and r block taxes Mortgage debt forgiveness. H and r block taxes  You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. H and r block taxes You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. H and r block taxes See Discharges of qualified principal residence indebtedness , later, and Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), for more information. H and r block taxes Repayment of first-time homebuyer credit. H and r block taxes  Generally, you must repay any credit you claimed for a home you bought if you disposed of the home or it ceased to be your main home in 2013. H and r block taxes If you bought the home in 2008 and you owned and used it as your main home for all of 2013, you generally must continue repaying the credit with your 2013 tax return, but you do not have to attach Form 5405, Repayment of the First-Time Homebuyer Credit. H and r block taxes See Form 5405 and its instructions for details and for exceptions to the repayment rule. H and r block taxes Photographs of missing children. H and r block taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H and r block taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H and r block taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H and r block taxes Introduction This publication provides tax information for homeowners. H and r block taxes Your home may be a house, condominium, cooperative apartment, mobile home, houseboat, or house trailer that contains sleeping space and toilet and cooking facilities. H and r block taxes The following topics are explained. H and r block taxes How you treat items such as settlement and closing costs, real estate taxes, sales taxes, home mortgage interest, and repairs. H and r block taxes What you can and cannot deduct on your tax return. H and r block taxes The tax credit you can claim if you received a mortgage credit certificate when you bought your home. H and r block taxes Why you should keep track of adjustments to the basis of your home. H and r block taxes (Your home's basis generally is what it cost; adjustments include the cost of any improvements you might make. H and r block taxes ) What records you should keep as proof of the basis and adjusted basis. H and r block taxes Comments and suggestions. H and r block taxes   We welcome your comments about this publication and your suggestions for future editions. H and r block taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H and r block taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H and r block taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H and r block taxes   You can send your comments from www. H and r block taxes irs. H and r block taxes gov/formspubs/. H and r block taxes Click on “More Information” and then on “Comment on Tax Forms and Publications”. H and r block taxes   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H and r block taxes Ordering forms and publications. H and r block taxes   Visit www. H and r block taxes irs. H and r block taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H and r block taxes Internal Revenue Service 1201 N. H and r block taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H and r block taxes   If you have a tax question, check the information available on IRS. H and r block taxes gov or call 1-800-829-1040. H and r block taxes We cannot answer tax questions sent to either of the above addresses. H and r block taxes Useful Items - You may want to see: Publication 523 Selling Your Home 527 Residential Rental Property 547 Casualties, Disasters, and Thefts 551 Basis of Assets 555 Community Property 587 Business Use of Your Home 936 Home Mortgage Interest Deduction Form (and Instructions) 5405 Repayment of the First-Time Homebuyer Credit 5695 Residential Energy Credits 8396 Mortgage Interest Credit See How To Get Tax Help , near the end of this publication, for information about getting publications and forms. H and r block taxes Prev  Up  Next   Home   More Online Publications
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The H And R Block Taxes

H and r block taxes 7. H and r block taxes   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. H and r block taxes Custodian account for your child. H and r block taxes Penalty for failure to supply SSN. H and r block taxes Reporting backup withholding. H and r block taxes Savings account with parent as trustee. H and r block taxes Interest not reported on Form 1099-INT. H and r block taxes Nominees. H and r block taxes Incorrect amount. H and r block taxes Information reporting requirement. H and r block taxes Taxable InterestInterest subject to penalty for early withdrawal. H and r block taxes Money borrowed to invest in certificate of deposit. H and r block taxes U. H and r block taxes S. H and r block taxes Savings Bonds Education Savings Bond Program U. H and r block taxes S. H and r block taxes Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. H and r block taxes How To Report Interest IncomeSchedule B (Form 1040A or 1040). H and r block taxes Reporting tax-exempt interest. H and r block taxes U. H and r block taxes S. H and r block taxes savings bond interest previously reported. H and r block taxes Reminder Foreign-source income. H and r block taxes  If you are a U. H and r block taxes S. H and r block taxes citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. H and r block taxes S. H and r block taxes law. H and r block taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. H and r block taxes Introduction This chapter discusses the following topics. H and r block taxes Different types of interest income. H and r block taxes What interest is taxable and what interest is nontaxable. H and r block taxes When to report interest income. H and r block taxes How to report interest income on your tax return. H and r block taxes In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. H and r block taxes Exceptions to this rule are discussed later in this chapter. H and r block taxes You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. H and r block taxes See Money borrowed to invest in certificate of deposit , later, and chapter 28. H and r block taxes Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. H and r block taxes S. H and r block taxes Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. H and r block taxes S. H and r block taxes Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. H and r block taxes Recordkeeping. H and r block taxes You should keep a list showing sources and interest amounts received during the year. H and r block taxes Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. H and r block taxes Tax on unearned income of certain children. H and r block taxes    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. H and r block taxes If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. H and r block taxes If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. H and r block taxes   Some parents can choose to include the child's interest and dividends on the parent's return. H and r block taxes If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. H and r block taxes   For more information about the tax on unearned income of children and the parents' election, see chapter 31. H and r block taxes Beneficiary of an estate or trust. H and r block taxes   Interest you receive as a beneficiary of an estate or trust is generally taxable income. H and r block taxes You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. H and r block taxes , from the fiduciary. H and r block taxes Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. H and r block taxes Social security number (SSN). H and r block taxes   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. H and r block taxes This includes payers of interest. H and r block taxes If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. H and r block taxes SSN for joint account. H and r block taxes   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. H and r block taxes (For information on who owns the funds in a joint account, see Joint accounts , later. H and r block taxes ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. H and r block taxes This is because only one name and SSN can be shown on Form 1099. H and r block taxes   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. H and r block taxes For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. H and r block taxes Custodian account for your child. H and r block taxes   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. H and r block taxes For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. H and r block taxes Penalty for failure to supply SSN. H and r block taxes   If you do not give your SSN to the payer of interest, you may have to pay a penalty. H and r block taxes See Failure to supply SSN under Penalties in chapter 1. H and r block taxes Backup withholding also may apply. H and r block taxes Backup withholding. H and r block taxes   Your interest income is generally not subject to regular withholding. H and r block taxes However, it may be subject to backup withholding to ensure that income tax is collected on the income. H and r block taxes Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. H and r block taxes   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. H and r block taxes For more information, see Backup Withholding in chapter 4. H and r block taxes Reporting backup withholding. H and r block taxes   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. H and r block taxes The Form 1099-INT will show any backup withholding as “Federal income tax withheld. H and r block taxes ” Joint accounts. H and r block taxes   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. H and r block taxes Income from property given to a child. H and r block taxes   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. H and r block taxes   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. H and r block taxes Savings account with parent as trustee. H and r block taxes   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. H and r block taxes The savings account legally belongs to the child. H and r block taxes The parents are not legally permitted to use any of the funds to support the child. H and r block taxes Form 1099-INT. H and r block taxes   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. H and r block taxes This form shows you the interest you received during the year. H and r block taxes Keep this form for your records. H and r block taxes You do not have to attach it to your tax return. H and r block taxes   Report on your tax return the total interest income you receive for the tax year. H and r block taxes Interest not reported on Form 1099-INT. H and r block taxes   Even if you do not receive Form 1099-INT, you must still report all of your interest income. H and r block taxes For example, you may receive distributive shares of interest from partnerships or S corporations. H and r block taxes This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. H and r block taxes , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. H and r block taxes Nominees. H and r block taxes   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. H and r block taxes   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. H and r block taxes Incorrect amount. H and r block taxes   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. H and r block taxes The new Form 1099-INT you receive will be marked “Corrected. H and r block taxes ” Form 1099-OID. H and r block taxes   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. H and r block taxes For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. H and r block taxes Exempt-interest dividends. H and r block taxes   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. H and r block taxes (However, see Information reporting requirement , next. H and r block taxes ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. H and r block taxes You do not reduce your basis for distributions that are exempt-interest dividends. H and r block taxes Information reporting requirement. H and r block taxes   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. H and r block taxes This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. H and r block taxes Note. H and r block taxes Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. H and r block taxes See Alternative Minimum Tax (AMT) in chapter 30 for more information. H and r block taxes Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. H and r block taxes Interest on VA dividends. H and r block taxes   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. H and r block taxes This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. H and r block taxes Individual retirement arrangements (IRAs). H and r block taxes   Interest on a Roth IRA generally is not taxable. H and r block taxes Interest on a traditional IRA is tax deferred. H and r block taxes You generally do not include it in your income until you make withdrawals from the IRA. H and r block taxes See chapter 17. H and r block taxes Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. H and r block taxes The following are some sources of taxable interest. H and r block taxes Dividends that are actually interest. H and r block taxes   Certain distributions commonly called dividends are actually interest. H and r block taxes You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. H and r block taxes  The “dividends” will be shown as interest income on Form 1099-INT. H and r block taxes Money market funds. H and r block taxes   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. H and r block taxes Generally, amounts you receive from money market funds should be reported as dividends, not as interest. H and r block taxes Certificates of deposit and other deferred interest accounts. H and r block taxes   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. H and r block taxes You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. H and r block taxes The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. H and r block taxes If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. H and r block taxes Interest subject to penalty for early withdrawal. H and r block taxes   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. H and r block taxes You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. H and r block taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. H and r block taxes Money borrowed to invest in certificate of deposit. H and r block taxes   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. H and r block taxes You must report the total interest you earn on the certificate in your income. H and r block taxes If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. H and r block taxes See Interest Expenses in chapter 3 of Publication 550. H and r block taxes Example. H and r block taxes You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. H and r block taxes The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. H and r block taxes The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. H and r block taxes The bank also gives you a statement showing that you paid $310 interest for 2013. H and r block taxes You must include the $575 in your income. H and r block taxes If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. H and r block taxes Gift for opening account. H and r block taxes   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. H and r block taxes   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. H and r block taxes For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. H and r block taxes The value is determined by the cost to the financial institution. H and r block taxes Example. H and r block taxes You open a savings account at your local bank and deposit $800. H and r block taxes The account earns $20 interest. H and r block taxes You also receive a $15 calculator. H and r block taxes If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. H and r block taxes You must report $35 interest income on your tax return. H and r block taxes Interest on insurance dividends. H and r block taxes   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. H and r block taxes However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. H and r block taxes Prepaid insurance premiums. H and r block taxes   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. H and r block taxes U. H and r block taxes S. H and r block taxes obligations. H and r block taxes   Interest on U. H and r block taxes S. H and r block taxes obligations, such as U. H and r block taxes S. H and r block taxes Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. H and r block taxes Interest on tax refunds. H and r block taxes   Interest you receive on tax refunds is taxable income. H and r block taxes Interest on condemnation award. H and r block taxes   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. H and r block taxes Installment sale payments. H and r block taxes   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. H and r block taxes That interest is taxable when you receive it. H and r block taxes If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. H and r block taxes See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. H and r block taxes Interest on annuity contract. H and r block taxes   Accumulated interest on an annuity contract you sell before its maturity date is taxable. H and r block taxes Usurious interest. H and r block taxes   Usurious interest is interest charged at an illegal rate. H and r block taxes This is taxable as interest unless state law automatically changes it to a payment on the principal. H and r block taxes Interest income on frozen deposits. H and r block taxes   Exclude from your gross income interest on frozen deposits. H and r block taxes A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. H and r block taxes   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). H and r block taxes If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. H and r block taxes   The interest you exclude is treated as credited to your account in the following year. H and r block taxes You must include it in income in the year you can withdraw it. H and r block taxes Example. H and r block taxes $100 of interest was credited on your frozen deposit during the year. H and r block taxes You withdrew $80 but could not withdraw any more as of the end of the year. H and r block taxes You must include $80 in your income and exclude $20 from your income for the year. H and r block taxes You must include the $20 in your income for the year you can withdraw it. H and r block taxes Bonds traded flat. H and r block taxes   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. H and r block taxes The defaulted or unpaid interest is not income and is not taxable as interest if paid later. H and r block taxes When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. H and r block taxes Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. H and r block taxes See Bonds Sold Between Interest Dates , later, for more information. H and r block taxes Below-market loans. H and r block taxes   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. H and r block taxes See Below-Market Loans in chapter 1 of Publication 550 for more information. H and r block taxes U. H and r block taxes S. H and r block taxes Savings Bonds This section provides tax information on U. H and r block taxes S. H and r block taxes savings bonds. H and r block taxes It explains how to report the interest income on these bonds and how to treat transfers of these bonds. H and r block taxes For other information on U. H and r block taxes S. H and r block taxes savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. H and r block taxes O. H and r block taxes Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. H and r block taxes O. H and r block taxes Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. H and r block taxes O. H and r block taxes Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. H and r block taxes treasurydirect. H and r block taxes gov/indiv/indiv. H and r block taxes htm. H and r block taxes Accrual method taxpayers. H and r block taxes   If you use an accrual method of accounting, you must report interest on U. H and r block taxes S. H and r block taxes savings bonds each year as it accrues. H and r block taxes You cannot postpone reporting interest until you receive it or until the bonds mature. H and r block taxes Accrual methods of accounting are explained in chapter 1 under Accounting Methods . H and r block taxes Cash method taxpayers. H and r block taxes   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. H and r block taxes S. H and r block taxes savings bonds when you receive it. H and r block taxes The cash method of accounting is explained in chapter 1 under Accounting Methods. H and r block taxes But see Reporting options for cash method taxpayers , later. H and r block taxes Series HH bonds. H and r block taxes    These bonds were issued at face value. H and r block taxes Interest is paid twice a year by direct deposit to your bank account. H and r block taxes If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. H and r block taxes   Series HH bonds were first offered in 1980 and last offered in August 2004. H and r block taxes Before 1980, series H bonds were issued. H and r block taxes Series H bonds are treated the same as series HH bonds. H and r block taxes If you are a cash method taxpayer, you must report the interest when you receive it. H and r block taxes   Series H bonds have a maturity period of 30 years. H and r block taxes Series HH bonds mature in 20 years. H and r block taxes The last series H bonds matured in 2009. H and r block taxes Series EE and series I bonds. H and r block taxes   Interest on these bonds is payable when you redeem the bonds. H and r block taxes The difference between the purchase price and the redemption value is taxable interest. H and r block taxes Series EE bonds. H and r block taxes   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. H and r block taxes   Before July 1980, series E bonds were issued. H and r block taxes The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. H and r block taxes Paper series EE and series E bonds are issued at a discount. H and r block taxes The face value is payable to you at maturity. H and r block taxes Electronic series EE bonds are issued at their face value. H and r block taxes The face value plus accrued interest is payable to you at maturity. H and r block taxes As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. H and r block taxes   Owners of paper series EE bonds can convert them to electronic bonds. H and r block taxes These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). H and r block taxes Series I bonds. H and r block taxes   Series I bonds were first offered in 1998. H and r block taxes These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. H and r block taxes The face value plus all accrued interest is payable to you at maturity. H and r block taxes Reporting options for cash method taxpayers. H and r block taxes   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. H and r block taxes Method 1. H and r block taxes Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. H and r block taxes (However, see Savings bonds traded , later. H and r block taxes )  Note. H and r block taxes Series EE bonds issued in 1983 matured in 2013. H and r block taxes If you have used method 1, you generally must report the interest on these bonds on your 2013 return. H and r block taxes The last series E bonds were issued in 1980 and matured in 2010. H and r block taxes If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. H and r block taxes Method 2. H and r block taxes Choose to report the increase in redemption value as interest each year. H and r block taxes You must use the same method for all series EE, series E, and series I bonds you own. H and r block taxes If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. H and r block taxes    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. H and r block taxes To learn how, see Education Savings Bond Program, later. H and r block taxes Change from method 1. H and r block taxes   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. H and r block taxes In the year of change you must report all interest accrued to date and not previously reported for all your bonds. H and r block taxes   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. H and r block taxes Change from method 2. H and r block taxes   To change from method 2 to method 1, you must request permission from the IRS. H and r block taxes Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. H and r block taxes You have typed or printed the following number at the top: “131. H and r block taxes ” It includes your name and social security number under “131. H and r block taxes ” It includes the year of change (both the beginning and ending dates). H and r block taxes It identifies the savings bonds for which you are requesting this change. H and r block taxes It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. H and r block taxes   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). H and r block taxes   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. H and r block taxes On the statement, type or print “Filed pursuant to section 301. H and r block taxes 9100-2. H and r block taxes ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). H and r block taxes    By the date you file the original statement with your return, you must also send a signed copy to the address below. H and r block taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. H and r block taxes O. H and r block taxes Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. H and r block taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. H and r block taxes In that case, follow the form instructions for an automatic change. H and r block taxes No user fee is required. H and r block taxes Co-owners. H and r block taxes   If a U. H and r block taxes S. H and r block taxes savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. H and r block taxes One co-owner's funds used. H and r block taxes    If you used your funds to buy the bond, you must pay the tax on the interest. H and r block taxes This is true even if you let the other co-owner redeem the bond and keep all the proceeds. H and r block taxes Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. H and r block taxes The co-owner who redeemed the bond is a “nominee. H and r block taxes ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. H and r block taxes Both co-owners' funds used. H and r block taxes   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. H and r block taxes Community property. H and r block taxes   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. H and r block taxes If you file separate returns, each of you generally must report one-half of the bond interest. H and r block taxes For more information about community property, see Publication 555. H and r block taxes Table 7-1. H and r block taxes   These rules are also shown in Table 7-1. H and r block taxes Ownership transferred. H and r block taxes   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. H and r block taxes But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. H and r block taxes   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. H and r block taxes Purchased jointly. H and r block taxes   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. H and r block taxes The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. H and r block taxes This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. H and r block taxes   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. H and r block taxes But the new co-owner will report only his or her share of the interest earned after the transfer. H and r block taxes   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. H and r block taxes    Table 7-1. H and r block taxes Who Pays the Tax on U. H and r block taxes S. H and r block taxes Savings Bond Interest IF . H and r block taxes . H and r block taxes . H and r block taxes THEN the interest must be reported by . H and r block taxes . H and r block taxes . H and r block taxes you buy a bond in your name and the name of another person as co-owners, using only your own funds you. H and r block taxes you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. H and r block taxes you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. H and r block taxes you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. H and r block taxes If you file separate returns, both you and your spouse generally report one-half of the interest. H and r block taxes Example 1. H and r block taxes You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. H and r block taxes The bond was issued to you and your spouse as co-owners. H and r block taxes You both postpone reporting interest on the bond. H and r block taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H and r block taxes At that time neither you nor your spouse has to report the interest earned to the date of reissue. H and r block taxes Example 2. H and r block taxes You bought a $1,000 series EE savings bond entirely with your own funds. H and r block taxes The bond was issued to you and your spouse as co-owners. H and r block taxes You both postpone reporting interest on the bond. H and r block taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H and r block taxes You must report half the interest earned to the date of reissue. H and r block taxes Transfer to a trust. H and r block taxes   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. H and r block taxes However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. H and r block taxes You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. H and r block taxes   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. H and r block taxes See Savings bonds traded , later. H and r block taxes Decedents. H and r block taxes   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. H and r block taxes This is explained in chapter 1 of Publication 550. H and r block taxes Savings bonds traded. H and r block taxes   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. H and r block taxes (You cannot trade series I bonds for series HH bonds. H and r block taxes After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. H and r block taxes ) Any cash you received is income up to the amount of the interest earned on the bonds traded. H and r block taxes When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. H and r block taxes Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. H and r block taxes Example. H and r block taxes You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. H and r block taxes You reported the $223 as taxable income on your tax return. H and r block taxes At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. H and r block taxes You hold the series HH bonds until maturity, when you receive $2,500. H and r block taxes You must report $300 as interest income in the year of maturity. H and r block taxes This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). H and r block taxes (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. H and r block taxes ) Choice to report interest in year of trade. H and r block taxes   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. H and r block taxes If you made this choice, it is treated as a change from method 1. H and r block taxes See Change from method 1 under Series EE and series I bonds, earlier. H and r block taxes Form 1099-INT for U. H and r block taxes S. H and r block taxes savings bonds interest. H and r block taxes   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. H and r block taxes Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. H and r block taxes However, your Form 1099-INT may show more interest than you have to include on your income tax return. H and r block taxes For example, this may happen if any of the following are true. H and r block taxes You chose to report the increase in the redemption value of the bond each year. H and r block taxes The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. H and r block taxes You received the bond from a decedent. H and r block taxes The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. H and r block taxes Ownership of the bond was transferred. H and r block taxes The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. H and r block taxes You were named as a co-owner, and the other co-owner contributed funds to buy the bond. H and r block taxes The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. H and r block taxes (See Co-owners , earlier in this chapter, for more information about the reporting requirements. H and r block taxes ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. H and r block taxes The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. H and r block taxes (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H and r block taxes , for the year of distribution. H and r block taxes )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. H and r block taxes Publication 550 includes examples showing how to report these amounts. H and r block taxes    Interest on U. H and r block taxes S. H and r block taxes savings bonds is exempt from state and local taxes. H and r block taxes The Form 1099-INT you receive will indicate the amount that is for U. H and r block taxes S. H and r block taxes savings bond interest in box 3. H and r block taxes Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. H and r block taxes S. H and r block taxes savings bonds during the year if you pay qualified higher educational expenses during the same year. H and r block taxes This exclusion is known as the Education Savings Bond Program. H and r block taxes You do not qualify for this exclusion if your filing status is married filing separately. H and r block taxes Form 8815. H and r block taxes   Use Form 8815 to figure your exclusion. H and r block taxes Attach the form to your Form 1040 or Form 1040A. H and r block taxes Qualified U. H and r block taxes S. H and r block taxes savings bonds. H and r block taxes   A qualified U. H and r block taxes S. H and r block taxes savings bond is a series EE bond issued after 1989 or a series I bond. H and r block taxes The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). H and r block taxes You must be at least 24 years old before the bond's issue date. H and r block taxes For example, 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 child. H and r block taxes    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. H and r block taxes Beneficiary. H and r block taxes   You can designate any individual (including a child) as a beneficiary of the bond. H and r block taxes Verification by IRS. H and r block taxes   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. H and r block taxes Qualified expenses. H and r block taxes   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. H and r block taxes   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. H and r block taxes   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. H and r block taxes Eligible educational institutions. H and r block taxes   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. H and r block taxes S. H and r block taxes Department of Education. H and r block taxes Reduction for certain benefits. H and r block taxes   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. H and r block taxes Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). H and r block taxes Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. H and r block taxes Expenses used to figure the tax-free portion of distributions from a qualified tuition program. H and r block taxes Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. H and r block taxes Any expense used in figuring the American Opportunity and lifetime learning credits. H and r block taxes Amount excludable. H and r block taxes   If the total proceeds (interest and principal) from the qualified U. H and r block taxes S. H and r block taxes savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. H and r block taxes If the proceeds are more than the expenses, you may be able to exclude only part of the interest. H and r block taxes   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. H and r block taxes The numerator of the fraction is the qualified higher educational expenses you paid during the year. H and r block taxes The denominator of the fraction is the total proceeds you received during the year. H and r block taxes Example. H and r block taxes In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. H and r block taxes S. H and r block taxes savings bond they bought in April 1997. H and r block taxes They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. H and r block taxes In 2013, they paid $4,000 of their daughter's college tuition. H and r block taxes They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. H and r block taxes They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. H and r block taxes They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. H and r block taxes Modified adjusted gross income limit. H and r block taxes   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. H and r block taxes You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. H and r block taxes   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. H and r block taxes   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. H and r block taxes If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. H and r block taxes   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. H and r block taxes Recordkeeping. H and r block taxes If you claim the interest exclusion, you must keep a written record of the qualified U. H and r block taxes S. H and r block taxes savings bonds you redeem. H and r block taxes Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. H and r block taxes You can use Form 8818 to record this information. H and r block taxes You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. H and r block taxes U. H and r block taxes S. H and r block taxes Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. H and r block taxes S. H and r block taxes Government. H and r block taxes Taxation of interest. H and r block taxes   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. H and r block taxes You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. H and r block taxes   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. H and r block taxes Treasury bills. H and r block taxes   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. H and r block taxes They are generally issued at a discount in the amount of $100 and multiples of $100. H and r block taxes The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. H and r block taxes Generally, you report this interest income when the bill is paid at maturity. H and r block taxes If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. H and r block taxes Treasury notes and bonds. H and r block taxes   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. H and r block taxes Maturity periods for Treasury bonds are longer than 10 years. H and r block taxes Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. H and r block taxes Generally, you report this interest for the year paid. H and r block taxes For more information, see U. H and r block taxes S. H and r block taxes Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. H and r block taxes For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. H and r block taxes O. H and r block taxes Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. H and r block taxes treasurydirect. H and r block taxes gov/indiv/indiv. H and r block taxes htm. H and r block taxes For information on series EE, series I, and series HH savings bonds, see U. H and r block taxes S. H and r block taxes Savings Bonds , earlier. H and r block taxes Treasury inflation-protected securities (TIPS). H and r block taxes   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. H and r block taxes For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. H and r block taxes Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. H and r block taxes You must report that part of the sales price as interest income for the year of sale. H and r block taxes If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. H and r block taxes When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. H and r block taxes See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. H and r block taxes Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. H and r block taxes But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. H and r block taxes For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. H and r block taxes Annuity. H and r block taxes   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. H and r block taxes See chapter 10 for information on pension and annuity income from nonqualified plans. H and r block taxes State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. H and r block taxes Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. H and r block taxes Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. H and r block taxes For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. H and r block taxes Information reporting requirement. H and r block taxes   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. H and r block taxes This is an information reporting requirement only. H and r block taxes It does not change tax-exempt interest to taxable interest. H and r block taxes Original Issue Discount (OID) Original issue discount (OID) is a form of interest. H and r block taxes You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. H and r block taxes A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. H and r block taxes OID is the difference between the stated redemption price at maturity and the issue price. H and r block taxes All debt instruments that pay no interest before maturity are presumed to be issued at a discount. H and r block taxes Zero coupon bonds are one example of these instruments. H and r block taxes The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). H and r block taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. H and r block taxes De minimis OID. H and r block taxes   You can treat the discount as zero if it is less than one-fourth of 1% (. H and r block taxes 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. H and r block taxes This small discount is known as “de minimis” OID. H and r block taxes Example 1. H and r block taxes You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. H and r block taxes One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. H and r block taxes Because the $20 discount is less than $25, the OID is treated as zero. H and r block taxes (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. H and r block taxes ) Example 2. H and r block taxes The facts are the same as in Example 1, except that the bond was issued at $950. H and r block taxes The OID is $50. H and r block taxes Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. H and r block taxes Debt instrument bought after original issue. H and r block taxes   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. H and r block taxes If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. H and r block taxes See Market Discount Bonds in chapter 1 of Publication 550. H and r block taxes Exceptions to reporting OID. H and r block taxes   The OID rules discussed in this chapter do not apply to the following debt instruments. H and r block taxes Tax-exempt obligations. H and r block taxes (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). H and r block taxes U. H and r block taxes S. H and r block taxes savings bonds. H and r block taxes Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). H and r block taxes Obligations issued by an individual before March 2, 1984. H and r block taxes Loans between individuals if all the following are true. H and r block taxes The lender is not in the business of lending money. H and r block taxes The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. H and r block taxes Avoiding any federal tax is not one of the principal purposes of the loan. H and r block taxes Form 1099-OID. H and r block taxes   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. H and r block taxes Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. H and r block taxes It also will show, in box 2, the stated interest you must include in your income. H and r block taxes A copy of Form 1099-OID will be sent to the IRS. H and r block taxes Do not file your copy with your return. H and r block taxes Keep it for your records. H and r block taxes   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. H and r block taxes But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. H and r block taxes Form 1099-OID not received. H and r block taxes   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. H and r block taxes gov that list total OID on certain debt instruments and have information that will help you figure OID. H and r block taxes For the latest OID tables, go to www. H and r block taxes irs. H and r block taxes gov and enter “OID tables” in the Search box. H and r block taxes If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. H and r block taxes Nominee. H and r block taxes   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. H and r block taxes Refiguring OID shown on Form 1099-OID. H and r block taxes   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. H and r block taxes You bought the debt instrument after its original issue and paid a premium or an acquisition premium. H and r block taxes The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). H and r block taxes For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. H and r block taxes Refiguring periodic interest shown on Form 1099-OID. H and r block taxes   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. H and r block taxes Certificates of deposit (CDs). H and r block taxes   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. H and r block taxes   This also applies to similar deposit arrangements with banks, building and loan associations, etc. H and r block taxes , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. H and r block taxes Bearer CDs. H and r block taxes   CDs issued after 1982 generally must be in registered form. H and r block taxes Bearer CDs are CDs not in registered form. H and r block taxes They are not issued in the depositor's name and are transferable from one individual to another. H and r block taxes   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. H and r block taxes More information. H and r block taxes   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. H and r block taxes When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. H and r block taxes Cash method. H and r block taxes   Most individual taxpayers use the cash method. H and r block taxes If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. H and r block taxes However, there are special rules for reporting the discount on certain debt instruments. H and r block taxes See U. H and r block taxes S. H and r block taxes Savings Bonds and Original Issue Discount (OID) , earlier. H and r block taxes Example. H and r block taxes On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. H and r block taxes You are not in the business of lending money. H and r block taxes The note stated that principal and interest would be due on August 31, 2013. H and r block taxes In 2013, you received $2,508. H and r block taxes 80 ($2,000 principal and $508. H and r block taxes 80 interest). H and r block taxes If you use the cash method, you must include in income on your 2013 return the $508. H and r block taxes 80 interest you received in that year. H and r block taxes Constructive receipt. H and r block taxes   You constructively receive income when it is credited to your account or made available to you. H and r block taxes You do not need to have physical possession of it. H and r block taxes For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. H and r block taxes This is true even if they are not yet entered in your passbook. H and r block taxes   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. H and r block taxes Accrual method. H and r block taxes   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. H and r block taxes Interest is earned over the term of the debt instrument. H and r block taxes Example. H and r block taxes If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. H and r block taxes You would report the interest as follows: 2011, $80; 2012, $249. H and r block taxes 60; and 2013, $179. H and r block taxes 20. H and r block taxes Coupon bonds. H and r block taxes   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. H and r block taxes It does not matter when you mail the coupon for payment. H and r block taxes How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. H and r block taxes You cannot use Form 1040EZ if your taxable interest income is more than $1,500. H and r block taxes Instead, you must use Form 1040A or Form 1040. H and r block taxes Form 1040A. H and r block taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. H and r block taxes Your taxable interest income is more than $1,500. H and r block taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H and r block taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. H and r block taxes You received a Form 1099-INT for U. H and r block taxes S. H and r block taxes savings bond interest that includes amounts you reported before 2013. H and r block taxes You received, as a nominee, interest that actually belongs to someone else. H and r block taxes You received a Form 1099-INT for interest on frozen deposits. H and r block taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. H and r block taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H and r block taxes You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). H and r block taxes List each payer's name and the amount of interest income received from each payer on line 1. H and r block taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H and r block taxes   You cannot use Form 1040A if you must use Form 1040, as described next. H and r block taxes Form 1040. H and r block taxes   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. H and r block taxes Schedule B (Form 1040A or 1040). H and r block taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. H and r block taxes Your taxable interest income is more than $1,500. H and r block taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H and r block taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. H and r block taxes You received a Form 1099-INT for U. H and r block taxes S. H and r block taxes savings bond interest that includes amounts you reported before 2013. H and r block taxes You received, as a nominee, interest that actually belongs to someone else. H and r block taxes You received a Form 1099-INT for interest on frozen deposits. H and r block taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H and r block taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. H and r block taxes Statement (2) in the preceding list under Form 1040 is true. H and r block taxes In Part I, line 1, list each payer's name and the amount received from each. H and r block taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H and r block taxes Reporting tax-exempt interest. H and r block taxes   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. H and r block taxes Add these amounts to any other tax-exempt interest you received. H and r block taxes Report the total on line 8b of Form 1040A or 1040. H and r block taxes   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. H and r block taxes Do not add tax-exempt interest in the total on Form 1040EZ, line 2. H and r block taxes   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. H and r block taxes These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H and r block taxes Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H and r block taxes    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. H and r block taxes Form 1099-INT. H and r block taxes   Your taxable interest income, except for interest from U. H and r block taxes S. H and r block taxes savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. H and r block taxes Add this amount to any other taxable interest income you received. H and r block taxes You must report all of your taxable interest income even if you do not receive a Form 1099-INT. H and r block taxes Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. H and r block taxes Your identifying number may be truncated on any paper Form 1099-INT you receive. H and r block taxes   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. H and r block taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550. H and r block taxes   Box 3 of Form 1099-INT shows the interest income you received from U. H and r block taxes S. H and r block taxes savings bonds, Treasury bills, Treasury notes, and Treasury bonds. H and r block taxes Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. H and r block taxes If part of the amount shown in box 3 was previously included in your interest income, see U. H and r block taxes S. H and r block taxes savings bond interest previously reported , later. H and r block taxes   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. H and r block taxes Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). H and r block taxes   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. H and r block taxes See chapter 28 for more information about investment expenses. H and r block taxes   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. H and r block taxes You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). H and r block taxes To take the credit, you may have to file Form 1116, Foreign Tax Credit. H and r block taxes For more information, see Publication 514, Foreign Tax Credit for Individuals. H and r block taxes U. H and r block taxes S. H and r block taxes savings bond interest previously reported. H and r block taxes   If you received a Form 1099-INT for U. H and r block taxes S. H and r block taxes savings bond interest, the form may show interest you do not have to report. H and r block taxes See Form 1099-INT for U. H and r block taxes S. H and r block taxes savings bonds interest , earlier, under U. H and r block taxes S. H and r block taxes Savings Bonds. H and r block taxes   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. H and r block taxes Then follow these steps. H and r block taxes Several lines above line 2, enter a subtotal of all interest listed on line 1. H and r block taxes Below the subtotal enter “U. H and r block taxes S. H and r block taxes Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. H and r block taxes Subtract these amounts from the subtotal and enter the result on line 2. H and r block taxes More information. H and r block taxes   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. H and r block taxes Prev  Up  Next   Home   More Online Publications