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Savings-Bonds-Alert: How much should I hold back for taxes?

Thursday, February 17, 2005

How much should I hold back for taxes?

I have some Savings Bonds reaching final maturity. I'd like to redeem them and reinvest in new Savings Bonds. How much of the interest income should I hold back for taxes rather than reinvesting? Tom's response Good thinking! Many people forget to hold back part of the redemption proceeds for taxes. Then they don't have any cash to the pay the tax they owe. The percentage you'll need to hold back depends on your filing status and taxable income. Taxable income is less than your total income. It's your total income less deductions and exemptions. Look for a line on your tax return labeled Taxable Income (it's line 42 on the standard 1040 form). Look up your taxable income under the filing status column in the table for the year you cashed the bond on our federal income tax brackets page. The percentage you need to hold back is on the right. For other investments, you'd also need to add on a few percentage points for state income tax, but that's not necessary here because Savings Bond interest isn't taxable at the state level.


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