Do I pay taxes only on interest for some HH bonds that I'm cashing out?

Do I pay taxes only on interest for some HH bonds that I'm cashing out?

by Paul K. Rudoy, CPA | Oct 31, 2017
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I have some HH bonds from 1998-2004 that I am cashing out. I see the deferred interest is $438.32 on a $500.00 bond. Will I pay taxes on only the interest? Also, if I cash out $200,000, will this put me in a higher tax bracket than the 15 percent I am currently in? I want to invest in mutual funds that are paying more than the 1.5 percent I currently receive.

The sale of the bonds will result in interest income being taxed. There will be no other taxation issues assuming the bonds were held to maturity.

Your tax bracket is dependent on your total taxable income. To determine what bracket you will be in, check out the tax tables at www.irs.gov.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Paul K. Rudoy, CPA, PFS, is managing partner of H2R CPA in Pittsburgh.
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