Treasury Direct wrote:An HH/H Bond's face value may include deferred (postponed) interest from an earlier bond. If it is carrying deferred interest, you will receive that interest as part of the bond's face value when you redeem that bond.
Is it taxable?
Federal income tax: Yes
State and local income tax: No
You must report HH Bond interest on your federal income tax return for the year in which we paid the interest.
HH/H Bonds were offered in exchange for EE/E Bonds and some other older savings bond series. Interest on the EE/E and other bonds exchanged may have been deferred through the life of the HH/H Bond.
Allan12 wrote:My sister last May graduated with a degree in engineering.
She spent a year traveling and had $0 income in 2012.
She cashed in $15,000 of series HH bonds in 2012. She used the money to pay down student loans.
She went to our CPA and he says that she owes $1200 federally because she traded in the bonds. This sounds correct since they are series hh.
However, she had no income and they were used to pay down us government loans.
Shouldn't she owe $0 because she had no income?
damjam wrote:Sorry, since your parents are claiming your sister as a dependent she can not take the student loan interest deduction. Neither can your parents if the loan is your sister's legal obligation.
As for the tax owed, this is what I got:
your sister's taxable income is $11,749 - $950 = $10,799. ($950 is the standard deduction for someone claimed as someone else's dependent)
Using the tax tables that comes to a tax owed of $1,181.
Not that far off, but still not the same number. Perhaps she is being assessed a penalty for not making estimated payments?
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