What exactly is HH savings bond deferred interest?

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Michaelrugg14
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Joined: Tue Oct 08, 2019 10:55 am

What exactly is HH savings bond deferred interest?

Post by Michaelrugg14 » Tue Oct 08, 2019 11:05 am

Ok, long story short, I received 8 $500 HH series savings bond each with $425 defered interest.

What I would like to know is, what exactly is deferred interest?

Do I get this money along with the face value when the bonds are cashed?

Do I only get the face value?

Any information on this would be appreciated as all I can find is the small mention of it on the treasury website.

Silk McCue
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Re: What exactly is HH savings bond deferred interest?

Post by Silk McCue » Tue Oct 08, 2019 1:25 pm

Welcome to Bogleheads!

https://www.treasurydirect.gov/indiv/re ... redeem.htm
An HH bond's face value may include deferred (postponed) interest from an earlier bond. If the HH bond carries deferred interest, you will receive that interest as part of its face value when you cash it. For information on any tax consequences of deferred interest see "Tax Considerations for Series HH Bonds."
Cheers

Topic Author
Michaelrugg14
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Joined: Tue Oct 08, 2019 10:55 am

Re: What exactly is HH savings bond deferred interest?

Post by Michaelrugg14 » Tue Oct 08, 2019 1:37 pm

Yes, I understood that meaning thr deferred interest in each bond would be paid to me.


Is that typically done as a separate payment?

A payment for only the face value just hit my account today.

Silk McCue
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Re: What exactly is HH savings bond deferred interest?

Post by Silk McCue » Tue Oct 08, 2019 1:46 pm

According to the quote I shared it appears to be a part of the face value.
An HH bond's face value may include deferred (postponed) interest from an earlier bond. If the HH bond carries deferred interest, you will receive that interest as part of its face value when you cash it. For information on any tax consequences of deferred interest see "Tax Considerations for Series HH Bonds.
I can't provide insight beyond that.

Cheers

Geologist
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Re: What exactly is HH savings bond deferred interest?

Post by Geologist » Tue Oct 08, 2019 2:03 pm

The face value includes the deferred interest. There is no separate payment. Whoever got the HH savings bond deferred paying interest on earlier EE savings bonds by having all the accumulated interest turned into the HH bond.

You will owe tax on the deferred interest ($425 of the $500 for each HH bond) plus the separate interest payment.

Gill
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Re: What exactly is HH savings bond deferred interest?

Post by Gill » Tue Oct 08, 2019 2:41 pm

The deferred interest was from exchanging E Bonds into H Bonds. H Bonds were issued at face value so there was no interest income at maturity. However, if an E Bond with $200 accrued interest was exchanged into an H Bond with a $500 face value, there would be $200 interest income at maturity of the H Bond.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Geologist
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Re: What exactly is HH savings bond deferred interest?

Post by Geologist » Tue Oct 08, 2019 2:52 pm

Gill wrote:
Tue Oct 08, 2019 2:41 pm
The deferred interest was from exchanging E Bonds into H Bonds. H Bonds were issued at face value so there was no interest income at maturity. However, if an E Bond with $200 accrued interest was exchanged into an H Bond with a $500 face value, there would be $200 interest income at maturity of the H Bond.
Gill
Technically, E bonds were converted into H bonds and EE bonds into HH bonds. However, you don't mean that HH bonds didn't pay interest. They do/did. They just do so as an electronic cash payment every six months. They don't accumulate interest as part of the value of the bond the way EE bonds do. That's why I referred to a separate interest payment: when the HH bond matures, there is a separate interest payment (just as there has been at 6 month intervals since issuance).

Gill
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Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: What exactly is HH savings bond deferred interest?

Post by Gill » Tue Oct 08, 2019 3:06 pm

Geologist wrote:
Tue Oct 08, 2019 2:52 pm
Gill wrote:
Tue Oct 08, 2019 2:41 pm
The deferred interest was from exchanging E Bonds into H Bonds. H Bonds were issued at face value so there was no interest income at maturity. However, if an E Bond with $200 accrued interest was exchanged into an H Bond with a $500 face value, there would be $200 interest income at maturity of the H Bond.
Gill
However, you don't mean that HH bonds didn't pay interest.
No, I didn't mean that and I know how HH Bonds pay interest. My point was the maturity of the bond doesn't involve an interest component.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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