How do the taxes work on my H savings bonds?

Q: Our H savings bonds reach final maturity in July. There is a taxable interest amount shown on the face of each bond. How is this reported to the IRS? Must the bonds be redeemed at one time?

A: The deferred interest shown on your bonds is taxable when the bonds are redeemed or they reach maturity, whichever comes first. Delaying redemption would mean you would not be earning any interest on the money but you would still owe the taxes. You report the deferred interest on your 2008 tax return.