Do you have Series EE U.S. savings bonds that were bought many years ago, and you now wonder how the interest on them is taxed? EE bonds don’t pay interest currently. Instead, the accrued interest is reflected in their redemption value. (However, owners can elect to have the interest taxed annually.) EE bond interest isn’t subject to state income tax. And using the money for higher education may keep you from paying federal income tax on the interest. Unfortunately, the law doesn’t allow for the tax-free buildup of interest to continue indefinitely. When the bonds reach final maturity, they stop earning interest. Contact us if you have questions about the taxability of savings bonds.