Ibonds Maturing 2030,2031,2032, And 2033 And Existing 5 Year Cd Ladder

Ltssharon | Jul 12, 2025 | 478 posts since 2020

Hi,

I am looking for any strategies to reduce my income taxes when my ibonds mature in 2030, 2031,2032, and 2033.

All my money that is NOT in ibonds is in a 5 year ladder. As mentioned above, I have a lot of interest on ibonds which I will receive in 2030, 2031, 2032, and 2033.

I dread the FEDERAL income taxes that will happen in those years.

How can I strategize to minimize the FEDERAL income in the years 2030-2033?

I don't see any way to avoid it.

Thank you

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Answers

Mark11 | Jul 12, 2025 | 17 posts since 2025

I have the same problem, I'll be cashing mine in early to spread it out. I have '31,'32 and '33 so I'll start next year... it will still add about $50,000 to my income for the next 8 years, if I wait until they mature in '31,'32 and '33 it will add over $150,000.00 in income a year. If I knew back when I bought them what I know now I would have opted to pay the income tax every year instead of deferring it.

Ltssharon | Jul 12, 2025 | 478 posts since 2020

poster here. Thank you all. I see: I am going to have to learn how to use a future value calculator and apply it to my situation. I'll get busy on that before then end of 2025. Of course that will require guessing what the inflation rate part of the interest rate will be going forward. I will start implementing at the end of this year.

Ltssharon | Jul 13, 2025 | 478 posts since 2020

Ok, thankyou. Following your lead, I did my calculations on expected interest on ibonds maturing 2030,2031,2032,and 2033. I am in the same situation as you are retarding having income creases a year.

I would have therefore liked to start cashing in ibonds in 2025, but I sold a home I owned for 33 years, and increasing my earned income this year would increased my capital gains tax from 15 percent to 20 percent. Therefore I will start cashing in those ibonds in 2026,2027,2028, and 2029.

Good luck to both of us finding a place to invest the proceeds after we cash in the ibonds.
Thank you so much.

belko | Jul 12, 2025 | 170 posts since 2021

I-bonds are strange animals in the bond world, with unusual requirements and procedures. However, some of them may be useful in certain scenarios. If in the year you cash the i-bonds you also paid “qualified higher education expenses” for yourself, your spouse, or someone who can be named as your dependent for that tax year, you may qualify for a tax exclusion on the Federal i-bond interest. The rules are here, and note there are income limitations -

https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/using-bonds-for-higher-educa...

choice1 | Jul 12, 2025 | 375 posts since 2023

I solved my current "problem" by redeeming many ibonds courtesy of the $6K each added deduction...got rid of those pesty 0% fixed rate component bonds. Your future solution? Change to an accrual basis for taxes on ibonds (now)...spreads it out. Proves again, "most" don't have a viable exit strategy!!!

MY2CENTSWORTH | Jul 13, 2025 | 444 posts since 2016

Ltssharon and others, unless something has changed what I did was report the interest annually for tax purposes. I didn't actually receive the interest funds out of the Ibond, but when I sat down and figured out what the interest was going to amount too upon maturity I decided it was better for me to spread that out sooner especially because I assumed that the tax rates would only be going higher. It worked out well for me, but there is some paperwork involved in the bookkeeping department so that you or your heirs know that the tax has already been paid when they do finally mature.I just went quickly and looked to see what info I could find as it had been awhile since I reported my Ibond interest ad this is some of what I found:

Yes, you can choose to report the savings bond interest after the first year, but you must report all of the interest earned to that date. Here is an excerpt from IRS Publication 550. Method 1 is reporting interest at redemption, method 2 is reporting interest annually. "If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. In the year of change, you must report all interest accrued to date and not previously reported for all your bonds.Once you choose to report the interest each year, you must continue to do so for all Series EE, Series E, and Series I bonds you own and for any you get later, unless you request permission to change." So, you can wait until 2022 and report all of the interest earned in 2021 and in 2022 on your 2022 tax return. You will need to continue reporting your interest annually, unless you request permission to go back to method 1. You need to keep track of your interest reported each year, because in the year the bonds mature, or are redeemed, you will get a 1099-INT reporting all of the interest and you will need to adjust that amount based on your records. I hope that may help you decide your best option.

Bond_Lovin | Jul 15, 2025 | 2 posts since 2025

Gift them to your children or grandchildren, as they will be in a lower tax bracket. or use them on education, and they are tax free.

Ltssharon | 10 hours ago | 478 posts since 2020

Woy w, that is an interesting idea. I have to think about how wise my grandchildren are, and they are ages 32 years-9 months with quite varied personalities and choices. But I sure like the idea of avoiding taxes. Thank you

Ltssharon | 9 hours ago | 478 posts since 2020

Poster here: Well, I got right on it but this is what I found. I am still stuck with taxes as per this.
"Gifting I Bonds you own
Gifting an I bond before maturity will accelerate taxation of the interest income. Giving away bonds you already own to someone else doesn't get you off the hook with the federal government for owing money on previously untaxed interest." Thank you. I really appreciate the idea.

Bond_Lovin | 8 hours ago | 2 posts since 2025

Sorry, i tried. Growing up in the 80s and 90s, ee bonds were what my parents used for our college funds. I believe you dont get taxed on the interest when being used for education. Not sure if you can fund someones college with them, or of that also qualifies as "transferring" them.

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