Iz emailed: Is the interest from US savings bonds redeemed during the year considered a capital gain, long or short, by the IRS?
Neither. Interest from savings bonds counts as regular income, not capital gains. The interest is considered part of your gross income and taxed at your regular federal tax rate. You can either report the money you earn on savings bonds annually on your tax return, or after you cash in your bonds. You can find more information about reporting interest earned on savings bonds on TreasuryDirect.gov or the IRS’s website. According to the Treasury, most investors defer reporting the interest, putting it off until they file a federal income tax return for the year in which they redeem it.