Question:

I just inherited from my mom EE savings bonds that have not reached maturity. Will I owe federal income tax on the accrued but untaxed pre-death interest? It depends,

Answer:

We assume your mom opted to defer reporting the bond interest as income until the earlier of the bonds mature or when there’re cashed in. Now that she has died, her executor can opt to include on her final income tax return  all pre-death interest earned on the bonds. If this is done, then you would report only post-death interest on you 1040 in the year the bonds mature or are redeemed. If the executor doesn’t include the interest income on your mom’s final return, you will own taxes on all bond interest in the year of maturity or redemption.