Updated October 29, 2026. Quick answer: Publication 550 (2025) has a five-line worksheet for savings bond interest when the bond came out of a retirement or profit-sharing plan. The plan distribution already taxed the interest earned up to that day, so you subtract that part from the Form 1099-INT interest and report it on Schedule B as “U.S. Savings Bond Interest Previously Reported.”
The Treasury forms for inherited and TreasuryDirect savings bonds, read line by line: FS Form 5394 (closed or state-statute estate), FS Form 1048 (lost, stolen or destroyed savings bonds) and FS Form 5512 (redeem TreasuryDirect bonds or change bank).
What this worksheet is for
The publication states the rule: “If you acquire a U.S. savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond’s redemption value (its cost plus the interest accrued before the distribution).” On redemption “your interest income includes only the interest accrued after the bond was distributed.” The worksheet applies it: “Note: Use the worksheet below to figure the amount you subtract from the interest shown on Form 1099-INT.”
The five lines
| Line | What it asks |
|---|---|
| A | “Enter the amount of cash received upon redemption of the bond” |
| B | “Enter the value of the bond at the time of distribution by the plan” |
| C | “Subtract the amount on line B from the amount on line A. This is the amount of interest accrued on the bond since it was distributed by the plan” |
| D | “Enter the amount of interest shown on your Form 1099-INT” |
| E | “Subtract the amount on line C from the amount on line D. This is the amount you include in “U.S. Savings Bond Interest Previously Reported”” |
The publication adds a source for line B: “Your employer should tell you the value of each bond on the date it was distributed.”
Where the answer goes on Schedule B
The publication tells you to “include all the interest shown on your Form 1099-INT as well as any other taxable interest income you received.” Then “Several rows above Schedule B (Form 1040), line 2, put a subtotal of all interest listed on Schedule B (Form 1040), line 1.” Below the subtotal, enter the label from the first section and the amount from line E, and subtract it from the subtotal on line 2. The recipient instructions on Form 1099-INT say “Box 3. Shows interest on U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes. This may or may not all be taxable. See Pub. 550.” The 1099-INT box that reports savings bond interest is covered on the 1099-INT box 3 page.
The IRS example, recomputed
The publication’s example is a Series EE bond from a profit-sharing plan: the plan distributed it with a value of $81.72, and the owner redeemed it for $88.16 with $38.16 of interest on the Form 1099-INT.
| Line | Entry | Amount |
|---|---|---|
| A | Cash received when the bond was redeemed | $88.16 |
| B | Value of the bond when the plan distributed it | $81.72 |
| C | Line A minus line B: interest accrued since the distribution (computed) | $6.44 (computed) |
| D | Interest shown on Form 1099-INT | $38.16 |
| E | Line D minus line C: the “previously reported” amount (computed) | $31.72 (computed) |
The publication prints the same results: $6.44 on line C and $31.72 on line E. It then says “Subtract $31.72 from the subtotal and enter the result on Schedule B (Form 1040), line 2.” The example’s dates are those printed in the publication; the worksheet arithmetic does not depend on them.
Edition
This page reads Publication 550 (2025), Investment Income and Expenses, the file irs.gov served on 2026-10-29 (sha256 in the kit data). Line numbers and letters belong to that edition, so check the label printed on the worksheet in your own copy before you follow a line reference.
Common mistakes
- Reporting only line C. Line C is the interest accrued since the distribution; line E is the amount previously reported that you subtract.
- Skipping the 1099-INT total. Include all of the 1099-INT interest on Schedule B line 1 and make the subtraction on the subtotal.
- Guessing the distribution value. The plan’s statement of the bond’s value on the distribution date supplies line B.
- Using the sheet for a bond you bought yourself. It applies only to a bond received in a taxable plan distribution.
Related: 1099-INT box 3, 1099-INT box 1, and inherited savings bonds.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for investment taxes
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
Explore optional adviser matching today
Considering financial advice? Request an adviser introduction with no obligation to hire.
The form is run by Kapitalwise, our advisor-matching partner. Requesting an introduction is free. Submitting the form shares your contact details with advisers, so expect calls and texts. Advisers pay for introductions. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you hire anyone. A match is not guaranteed.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Publication 550 (2025), Investment Income and Expenses: https://www.irs.gov/pub/irs-pdf/p550.pdf
- Form 1099-INT (Rev. January 2024), Interest Income, with the instructions for recipient: https://www.irs.gov/pub/irs-pdf/f1099int.pdf
Read from the IRS documents linked above on October 29, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.