How to minimize savings bond taxes

My father inherited series EE bonds and converted those to HH bonds and is trying to find a way to save from paying a ton of taxes when he cashes them in. What are his options to reduce the taxes? If nothing else he would like to give the tax money to the small town he lives in for improvements. Tom's response Although there aren't any ways to get out of paying income tax on these completely, there are ways to minimize the tax and to make sure he doesn't pay a hidden interest rate penalty when he cashes them. Here are some links you might want to look at:

• The deferred-tax time bomb
• Hidden interest-rate penalties

If your father is willing to give the money away for local improvments, another thought would be to donate to a charitable organization in his community. The IRS allows deductions for charitable contributions, which could offset his interest income. If this seems interesting to you, however, I recommend you consult a tax specialist, rather than a savings bond specialist like me, to make sure this will work.