How much are your U.S. savings bonds worth? HD: Education benefits, payroll deductions increase bonds' appeal

December 26, 1990

U.S. savings bonds have long been a popular way to save money, particularly because many employers allow them to be purchased through payroll deductions.

Use of savings bonds as a way to pay for college education has also been encouraged by a law that allows eligible bondholders to exempt the interest of recent Series EE bonds from federal taxes.

As a service to readers, The Evening Sun at year-end publishes the redemption value of all U.S. savings notes and bonds.

Savings notes, also known as "Freedom Shares," were issued during a four-year period starting in the Johnson administration. Series E bonds were issued beginning in May 1941 and were replaced by Series EE bonds, which were issued beginning in January 1980.

Tables showing redemption values of all Series EE bonds and Series E bonds purchased from 1956 to 1980 appear on pages B3, B4, and B6. Tables showing the redemption values of the remaining Series E bonds will appear tomorrow.

Banks also have redemption tables. Redemption values and other information about savings bonds is available by calling the Treasury Department at (301) 962-2800.

Since 1982, the interest rate has been linked to rates paid on other government securities. Held five years or longer, EE bonds earn 85 percent of the average return on five-year Treasury securities during the period.

The fluctuating rate is set twice a year, in November and May. The current rate is 7.19 percent.

Interest on savings notes and bonds is exempt from state and local taxes. In addition, federal taxes can be deferred until the bonds are redeemed.

If savings bonds are used to pay for education, the government will allow a federal tax exemption for eligible taxpayers on interest on Series EE bonds purchased beginning in January 1990. The proceeds must be used for eligible post-secondary education expenses.

To qualify for the federal tax exemption on the interest income, you must follow certain rules. The owner of the bond must be at least 24 years old. If you purchase savings bonds for a child, put them in your own or the parent's name.

The bonds must be redeemed in the same year in which the education expense occurs. If the proceeds from redeeming the bonds, including both principal and interest, are greater than the educational expenses, the amount of interest that can be excluded that year will be reduced in proportion.

The federal tax exemption is also limited depending on the income of the bond holder during the year in which the bonds are redeemed. To get the full tax break, a single taxpayer can have a modified gross income of no more than $41,950 in 1991. A married couple filing jointly can have a modified gross income of no more than $62,900 in 1991.

The federal tax benefit is phased out for single taxpayers earning more than $57,700 and for married taxpayers filing jointly who earn more than $94,350 in 1991.

Every year the income figures will be adjusted for inflation.

U.S. savings bonds are sold at most financial institutions and through payroll savings.

The minimum purchase is a bond with a $50 face value, which means the buyer would pay $25.

There is a waiting period for bonds to accumulate interest before they can be redeemed. For example, Series EE bonds purchased from August through December 1990 are not eligible for redemption in January, and are not shown in the accompanying table.

If savings bonds are lost or stolen, the Treasury Department will replace them without a fee.

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