Artículo U.S. obligations.. U.S. obligations.

id="en_US_2025_publink1000171447"> U.S. obligations. Interest on U.S. obligations issued by any agency or instrumentality of the United States, such as U.S. Treasury bills, notes, and bonds, is taxable for federal income tax purposes. Interest on tax refunds. Interest you receive on tax refunds is taxable income. Interest on condemnation award. If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Installment sale payments. If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Generally, that interest is taxable when you receive it. If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. See Unstated Interest and Original Issue Discount (OID) in Pub. 537. Interest on annuity contract. Accumulated interest on an annuity contract you sell before its maturity date is taxable. Usurious interest. Usurious interest is interest charged at an illegal rate. This is taxable as interest unless state law automatically changes it to a payment on the principal. Interest income on frozen deposits. Exclude from your gross income interest on frozen deposits. A deposit is frozen if at the end of the year you can’t withdraw any part of the deposit because: The financial institution is or may become bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2025, see Frozen deposits under How To Report Interest Income in chapter 1 of Pub. 550 for information about reporting this interest income exclusion on your tax return. The interest you exclude is treated as credited to your account in the following year. You must include it in income in the year you can withdraw it. Example. $100 of interest was credited on your frozen deposit during the year. You withdrew $80 but couldn’t withdraw any more as of the end of the year. You must include $80 in your income and exclude $20 from your income for the year. You must include the $20 in your income for the year you can withdraw it. Bonds traded flat. If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but hasn’t been paid, the transaction is described as trading a bond flat. The defaulted or unpaid interest isn’t income and isn’t taxable as interest if paid later. When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. See Bonds Sold Between Interest Dates , later, for more information. Below-market loans. Generally, a “below-market loan” means any loan if (a) in the case of a gift or demand loan, interest is payable on the loan at a rate less than the applicable federal rate; or (b) in the case of a term loan, the amount loaned exceeds the present value (using a discount rate equal to the applicable federal rate) of all payments due under the loan. (See Code section 7872 for details.) Section 7872 applies to certain below-market loans, including gift loans, compensation-related loans, and corporation-shareholder loans. (See Code section 7872(c).) If you are the lender of a below-market loan, you may have additional interest income. See Below-Market Loans in chapter 1 of Pub. 550 for more information. U.S. Savings Bonds This section provides tax information on U.S. savings bonds. It explains how to report the interest income on these bonds and how to treat transfers of these bonds. U.S. savings bonds currently offered to individuals include Series EE bonds and Series I bonds. . For information about U.S. savings bonds, go to TreasuryDirect.gov/savings-bonds/ . . . If you prefer, write to: . Treasury Retail Securities Services P.O. Box 9150 Minneapolis, MN 55480-9150 . Accrual method taxpayers. If you use an accrual method of accounting, you must report interest on U.S. savings bonds each year as it accrues. You can’t postpone reporting interest until you receive it or until the bonds mature. Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Cash method taxpayers. If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U.S. savings bonds when you receive it. The cash method of accounting is explained in chapter 1 under Accounting Methods . But see Reporting options for cash method taxpayers , later. Series H and HH bonds. The U.S. Treasury sold HH savings bonds from 1980 through August 2004. HH savings bonds earn interest for up to 20 years. So the last HH bonds will stop earning interest in 2024. (See TreasuryDirect.gov/savings-bonds/hh-bonds/ .) Certain HH bonds weren’t available for cash only. To buy those HH bonds, you had to trade in another security you had bought earlier. In making the exchange, you may have used interest the original security had earned to help pay for the HH bond. If you used an old bond to buy more than one HH bond, the interest you used to buy the bonds was divided proportionately among the HH bonds. You had a choice then for the tax on that interest: pay it then or wait and pay it later (defer it). Interest that you decided to pay later is “deferred interest.” If your HH bond has deferred interest, you see the amount identified on the front of the bond. You don’t have to report deferred interest on your federal income tax return until you are filing your return for the year in which the first of these events occurs: you cash the HH bond; the HH bond stops earning interest; the HH bond is reissued to show a change in ownership that is a taxable event. (See TreasuryDirect.gov/savings-bonds/hh-bonds/hh-bonds-tax-information .) Series H bonds were issued before 1980. All Series H bonds have matured and are no longer earning interest. In addition to the twice-a-year interest payments, most H/HH bonds have a deferred interest component. The reporting of this as income is addressed later in this chapter. Series EE and Series I bonds. Interest on these bonds is payable when you redeem the bonds. The difference between the purchase price and the redemption value is taxable interest. Series E and EE bonds. Series E bonds were issued before July 1980. All Series E bonds have matured and are no longer earning interest. Series EE bonds were first offered in January 1980 and have a maturity period of 30 years; they were offered in paper (definitive) form until 2012. Paper Series EE and Series E bonds were issued at a discount and increase in value as they earn interest. Electronic (book-entry) Series EE bonds were first offered in 2003; they are issued at face value and increase in value as they earn interest. For all Series E and Series EE bonds, the purchase price plus all accrued interest is payable to you at redemption. Series I bonds. Series I bonds were first offered in 1998. These are inflation-indexed bonds issued at face value with a maturity period of 30 years. Series I bonds increase in value as they earn interest. The face value plus all accrued interest is payable to you at redemption. Reporting options for cash method taxpayers. If you use the cash method of reporting income, you can report the interest on Series EE and Series I bonds in either of the following ways. Method 1. Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Method 2. Choose to report the increase in redemption value as interest each year. You must use the same method for all Series EE and Series I bonds you own. . If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. To learn how, see Education Savings Bond Program , later. . Change from method 1. 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 and Series I bonds you own and for any you get later, unless you request permission to change, as explained next. Change from method 2. To change from method 2 to method 1, see Revenue Procedure 2025-23, section 17. Co-owners. If a U.S. savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. One co-owner’s funds used. If you used your funds to buy the bond, you must pay the tax on the interest. This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. The co-owner who redeemed the bond is a “nominee.” See Nominee distributions under How To Report Interest Income in chapter 1 of Pub. 550 for more information about how a person who is a nominee reports interest income belonging to another person. Both co-owners’ funds used. If you and the other co-owner