U.S. savings bonds are one of the world's most widely owned securities, in part because the United States government backs them. Over the years, the government has issued several different series of savings bonds. If you come across an old Series HH bond in a safe deposit box, you might wonder how it compares with a current Series EE bond.
Series HH bonds took the place of Series H bonds and were issued from January 1980 through August 2004 with an original 10-year maturity, but were given a 10-year extension, allowing them to earn interest for a total of 20 years. The Series EE bond replaced the Series E bond in January 1980 -- and at the time of publication, the government continues to issue them. Series EE bonds were originally issued with varying maturities based on their date of issue. Series EE bonds issued after June 2003 all have a 20-year maturity. Interest extensions allow all Series EE bonds to earn interest for 30 years.
Series HH bonds are current income bonds. Purchased at face value, they pay semi-annual interest at a rate fixed on the day of purchase -- and you can redeem them upon maturity at face value. The interest rate is locked in for the initial 10 years, but the Treasury department can adjust them for the 10-year extended period. Series EE bonds are deferred-interest bonds. They build value over time. Series EE bonds purchased after May 2005 earn a fixed rate of interest. You purchase paper Series EE bonds at 50 percent of face value -- and they mature at face value. You purchase electronic Series EE bonds at face value -- and they increase in value based on their interest rates. The U.S. Treasury guarantees that Series EE bond will at least double in value after 20 years.
The interest on both Series HH bonds and Series EE bonds is exempt from state and local income taxes, but is fully taxable on your federal income tax in the year you receive it. With Series EE bonds, you have the option of paying taxes on the accrued interest each year, or of deferring paying taxes until you cash in the bonds. It's possible to exempt the interest on your Series EE bonds if you use the proceeds from the bonds to pay for qualifying higher education expenses. Series HH bonds don't qualify for the education deduction.
As you can no longer purchase Series HH bonds, you can no longer exchange your Series EE bonds for Series HH bonds. As of January 1, 2012, paper versions of U.S. savings bonds were no longer available for purchase at financial institutions. You can use your federal income tax return to purchase Series I bonds in paper format. U.S. savings bonds are one of the few securities that a child can own in her own name.
- Treasury Direct: Series HH/H Savings Bonds Rates & Terms
- Treasury Direct: EE/E Bonds Rates & Terms
- IRS: Publication 970, Education Savings Bond Program
- IRS: Topic 403 - Interest Received
- Treasury Direct: Series HH/H Tax Considerations
- Treasury Direct: Series EE/E Savings Bonds Tax Considerations
- Securities and Exchange Commission: Savings Bonds
- IRS: Now you can buy U.S. Series I Savings Bonds with your tax refund for anyone
- Treasury Direct: Register an EE or I Bond
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.