my kids inherited a couple savings bonds when their gma died. my son only made 30k this year but paid $2300 tax on the interest when he just did his taxes. It was originally a $3000 bond but sold for 10k or so. I was thinking that it was under the $19k free gift and he would not have to pay capital gains on the interest?? My daughter makes no $ still a student and will not file taxes this year but has the same interest gain. does she have to file taxes just to pay 20 % capital gains on the interest. I understand each of them is now the owner of the bond not my mother since she had died. thanks.
Sorry interest is always taxable. Somebody has to pay the tax on it. So they both have 7,000 of interest? She has to file a return for it and I think pay the Kiddie tax on it. Turbo Tax article
https://ttlc.intuit.com/turbotax-support/en-us/help-article/small-business-processes/2021-kiddie-tax/L4UfEmyxW_US_en_US?uid=lst7ptt8
It depends. Gift tax does not come into play when a bond is inherited. Gifts only apply when the donor is alive.
When the bonds are cashed the interest will be income to the beneficiary since tax was never paid on those earnings. Your son would have to include the interest on his own return as you stated.
Your daughter, even if your dependent, will need to file a return because it seems she meets the following dependent filing requirements below.