TIPS: Tax Considerations
What Is Taxable Income?
Interest payments from Treasury Inflation-Protected Securities (TIPS), and increases in the principal of TIPS, are subject to federal tax, but exempt from state and local income taxes.
Two forms are used to report the taxable income earned from TIPS:
- Form 1099-INT shows the sum of the semiannual interest payments made in a given year.
- Form 1099-OID shows the amount by which the principal of your TIPS increased due to inflation or decreased due to deflation. Increases in principal are taxable for the year in which they occur, even if your TIPS hasn't matured, so you haven't yet received a payment of principal.
Keeping Track of Your Taxable Income
If you hold a TIPS in TreasuryDirect, you can view your Form 1099-INT and Form 1099-OID online and print them. The forms are posted at the beginning of the year. Also, a record of all taxable transactions is available at any time. To see it, click the "Manage Direct" tab, and then under "Manage My Taxes" choose the appropriate year.
Legacy Treasury Direct*
If you hold a TIPS in Legacy Treasury Direct, we mail you your Form 1099-INT and Form 1099-OID.
If you need duplicate 1099-INT forms for the current tax year, you can order them from us. Order online in Electronic Services for Treasury Bills, Notes, and Bonds or call 800-722-2678, choose option 1, and follow the prompts. NOTE: Forms for the current tax year are available February through November.
To request 1099-INT forms for years prior to the current tax year, write to:
Bureau of the Public Debt
PO Box 426
Parkersburg, WV 26106-0426
Note: If you no longer have securities in Legacy Treasury Direct, please keep your address current with us until you receive your final tax statement.
Bank, Broker, or Dealer
Consult your bank, broker, or dealer.
December 31 Interest
When interest income on TIPS is scheduled to be paid on December 31 and that date isn't a business day, we report the income as being earned on the first federal banking day of the following year.
If you hold a TIPS with us, we can ease your tax burden by withholding up to 50 percent of your interest earnings.
- TreasuryDirect allows you to specify online the percentage you want us to withhold.
- With Legacy Treasury Direct, you call or write to your Treasury Retail Securities Site, give your account number, and state the percentage of your earnings that you want to withhold. If calling, dial 800-722-2678 and choose option 5 for a customer service representative. Representatives are available from 8 a.m. to 8 p.m. Eastern Time, Monday through Friday, except holidays. If you write, send your letter to Treasury Retail Securities Site, P.O. Box 9150, Minneapolis, MN 55480-9150.
With either system, we transfer your withholdings to the Internal Revenue Service and report the withheld amount on your Form 1099-INT.
Legacy Treasury Direct customers: You may be able to deduct the annual maintenance fee we impose on Legacy Treasury Direct accounts of more than $100,000. See IRS Publication 550.
*Legacy Treasury Direct is being phased out.