Would you consider I-Bonds as tax deferred?

Question

If the interest isn't considered income until you cash out the bonds would you consider I-bonds as a tax deferred account?

gogottliebs88 · Answer

Thanks Tom. The reason was explained by your second paragraph. Yes I was trying to streamline the process for tax reporting and forecasting without customizing the report to eliminate the I-Bond account. I guess its my choice between ease of use or following true accounting principles. Nice to know my thinking wasn't conceptually off-base.

Tom Young · Answer

If you've elected to use the cash method and only pay tax on your I bonds when you redeem them, then putting the I-Bonds in a tax-deferred Account does make some sense.  In this situation the I-Bonds function pretty much like a traditional IRA in that income received via the amortization of the "0-coupon" aspect of the bonds isn't taxable, but the redemption (in effect taking money out of the "IRA") is taxable.In a true accounting sense the amortization of the discount IS income so alternatively you could put the I-Bond in a taxable Investing Account, but then not use that Account when preparing Tax Reports, if you use that Quicken feature.