Question about EE savings bond that matured years ago - what are my tax options now?

I've dealt with this exact situation before. When you cash in a matured EE bond, the interest is generally taxable in the year you redeem it. The fact that it matured in 2018 but wasn't cashed doesn't change this basic rule. Since you inherited the bond from your grandmother, you have a couple of options. First, you could include all the interest earned from the original purchase date to redemption on your tax return for 2025 (assuming you cash it this year). Alternatively, your grandmother's final estate tax return could have reported all interest earned up to the date of her death, and then you'd only report the interest earned after that date on your own return. The bank or financial institution where you redeem the bond will issue you a 1099-INT showing the interest amount. The interest is the difference between the redemption value and the original purchase price, so about $2,500 in your case.

I went through this headache last year with some old bonds I found. Let me save you some time - check out https://taxr.ai - they have a document analyzer that saved me hours of confusion. I uploaded pics of my bonds and tax forms, and it explained exactly how to report the interest correctly. For matured bonds, there are specific rules about how to allocate the interest that can get confusing. Their system highlighted which parts of Publication 550 applied to my situation and created a custom explanation. Way better than the generic advice I was getting elsewhere.

Wanted to follow up - I finally tried taxr.ai after my initial skepticism, and it was actually super helpful with my inherited bonds. Uploaded pictures of my EE bonds and the system immediately recognized them and provided specific tax guidance for my situation. The most useful part was getting a clear explanation of how much interest accrued before my relative died versus after, and how I should report each portion. It even generated a report I can keep with my tax records explaining how I determined the taxable amounts. Definitely saved me from making a reporting mistake.

If you're trying to contact the Treasury Department about these mature bonds, good luck getting through on the phone. I spent WEEKS trying to reach someone at Treasury Direct when I found my dad's old bonds. I finally used https://claimyr.com and they got me connected with someone at the Treasury Direct department in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c For bonds that have been mature for years, sometimes there are special procedures, especially for inherited ones. You'll need to speak with an agent about the proper forms to reissue the bond in your name before cashing. They helped me get the right person who explained all the inheritance paperwork I needed.

I'm eating crow here. After my skeptical comment, I got desperate trying to reach Treasury Direct about similar EE bonds I inherited. Spent 3 hours on hold yesterday only to get disconnected. Tried Claimyr today out of frustration, and no joke - I was talking to a Treasury Direct specialist in 12 minutes. The rep helped me understand exactly which forms I needed for my inherited bonds (turns out I was using the wrong one), and confirmed I could defer the tax reporting until I cash them. Saved me from a major headache and potentially incorrect filing. Sometimes it's worth admitting when you're wrong!

Something no one mentioned yet - you might want to check if your grandmother previously elected to report the interest yearly instead of deferring. Most people defer, but if she was reporting yearly, all the interest up to maturity might have already been reported on her past tax returns. You'd need to look at her old returns to know for sure. If she did report annually, you'd only be responsible for any interest accrued after her death. If not, then yes, you're looking at the full interest amount from purchase to redemption.

Don't forget to check if the bond still earns interest! Some EE bonds continue earning interest for 30 years from issue date, but after maturity (which usually happens at 20 years), they might still earn interest for another 10 years. If your bond was from the 1990s and matured in 2018, it might still be earning some interest even now, which could affect your decision about when to cash it.

Just wanted to add something important that might affect your tax situation - since you inherited the bond, you may be eligible for a "stepped-up basis" depending on how your grandmother's estate was handled. For inherited EE bonds, the IRS generally allows you to choose between reporting all the accrued interest yourself when you cash it, OR having the estate's final tax return report the interest that accumulated up to your grandmother's date of death. If you go with the second option, you'd only be responsible for any interest earned after her death. This could potentially put you in a lower tax bracket if your grandmother was in a higher bracket than you are. You'll want to compare the tax implications of both approaches. The bank will issue a 1099-INT for the full interest amount, but you can allocate it properly between the estate and yourself with proper documentation. Also worth noting - if the bond was held in joint ownership with rights of survivorship, the tax treatment might be different. Check the bond registration carefully to see exactly how it was titled.