Difference Between Series E Bonds & Series H Bonds

Saving bonds come in paper and electronic forms.

Saving bonds come in paper and electronic forms.

U.S. savings bonds are among the most widely held securities in the world. Chances are you've probably got a few stashed away in a safe deposit box somewhere that your aunt or uncle gave you for your twelfth birthday. All savings bonds are not created equal. For instance, there are significant differences between Series E and Series H bonds.

History

Both Series E and Series H bonds trace their histories back to 1935 when President Franklin D. Roosevelt authorized the issuance of so-called baby bonds. The U.S. Treasury Department sold approximately $4 billion worth of Series A, B, C and D bonds between 1935 and 1941. The first Series E bonds were issued in early 1941 as Defense Bonds. Once the U.S. entered World War II the bonds became known as War Bonds. Series H bonds were first issued in June 1952.

Series E Bonds

Series E bonds were issued at a discount from their face value and were redeemable at face value upon maturity, 10 years later. Subsequent legislation allowed bondholders to continue receiving interest on their Series E bonds for between 30 and 40 years, depending on the issue date. Series EE bonds replaced Series E bonds in 1980. The last Series E bond ceased to earn interest in 2010, according to the U.S. Treasury Department's TreasuryDirect website. You can no longer purchase Series E bonds.

Series H Bonds

Series H bonds were introduced in 1952 as a current interest alternative to Series E bonds. Investors bought Series H bonds at face value. These bonds paid a fixed rate of interest — three percent in 1952 — every six months, with interest payments mailed to the bondholder. Bondholders could redeem their Series H bonds for their full face value after holding them for six months. The last Series H bond ceased earning interest in 2009. You can no longer purchase Series H bonds.

Tax Consequences

Interest earned on both Series E and Series H bonds was free from state income taxation, but was fully taxable on the bondholder's federal income tax return. The interest on Series E bonds accumulated tax-deferred until the bond was cashed in. The interest on Series H bonds was considered taxable in the year it was paid to the bondholder.

 

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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