When a bond is redeemed, an IRS Form 1099-INT is issued, either at the time of redemption or at the end of the tax year, to the person who redeemed the bond. The interest earned on your savings bonds is subject to federal income tax, which can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first. Savings bonds are subject to estate, inheritance, gift, or other excise taxes, whether federal or state.