How do HH bonds earn interest? HH bonds earn interest that we pay every six months. You locked in the interest rate for the first 10 years after the HH bond's issue date. On the bond's 10 th anniversary, we could reset the rate for the next 10 years of the bond's life. Interest stops when the HH bond is 20 years old. In what months does my HH bond earn interest? Those issued through January had final maturities of 29 years, 8 months.
All H bonds issued after January , until HH bonds replaced them in January , have final maturities of 30 years. Again, as of this writing, H bonds issued up to April have stopped earning interest. But HH bonds, which the government quit issuing after August , have final maturities of only 20 years. Consequently, any HH bonds you have that are older than 20 years should be cashed in to get back the original investment the face value. Taxes on savings bonds are free of state and local taxes, but you pay federal taxes at your ordinary income tax rate.
If you are an H or HH bondholder, you pay taxes on the interest as you receive it each year, and don't owe any taxes when you redeem them'the final payment is simply a return of the original principal. But with E and EE bonds and Savings Notes, you will owe taxes on the accumulated interest, assuming you elected to defer reporting the interest over the years, when you redeem them?
This interest income is taxable for the year of redemption or final maturity. If you missed that year'say you are like many people and just now realize some old E bonds you've got lying around the house matured years ago- you may need to file an amended tax return and possibly be subject to a late penalty and interest.
This savings bond program was designed to reward patient, long-term investors who hold bonds to maturity. When an investor bought a Series HH savings bond, they received a paper certificate that detailed the bonds they bought.
If that investor wanted to cash in the bond early, then they needed to return that paper certificate. While an investor held Series HH bonds, they would receive interest payments every six months. This interest income was deposited directly into the bondholder's bank account, providing a steady source of investment income that could be spent while the bond was still held.
That has historically provided among the lowest levels of risk possible for an investor. Series HH savings bonds had a minimum holding time of six months.
If an investor bought one of these bonds, they had to hold it for at least six months. After that, they could cash in the bond for the full face value at any time. The interest rate for the Series HH savings bonds was set every six months. When an investor bought a Series HH bond, they locked in that interest rate for 10 years.
After 10 years, the rate could be adjusted for the next 10 years. Series HH savings bonds reached maturity and stop earning interest income altogether 20 years after the investor bought the bond. At maturity, the investor was repaid the face value of the bond. Interest income received from Series HH savings bonds must be reported in the tax year it is received, but it is not subject to state and local taxes. Like the Series I savings bond , the Series HH savings bonds can be redeemed for full face value at any time.
This means the bondholder only benefits from the investment gains at the time the bond is cashed. In contrast, the Series HH bond paid interest income to bondholders every six months until maturity or redemption, while the principal value of the bond remained the same. For this reason, Series HH bonds appealed to risk-averse investors seeking regular income from their investments.
Because Series HH bonds had the backing and full faith and credit of the U. Department of the Treasury. Savings Bonds. Fixed Income Essentials. Certificate of Deposits CDs. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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