T axpayers who refinance to obtain lower interest rates must amortize points over the life of the loan unless loan proceeds are used to substantially improve the main residence. If only a portion of the loan is used to improve the home, only that portion is deductible in the year paid. If the loan is paid off early, any remaining points may be deducted in full in the year the loan is paid off. Be sure to ask your tax consultant about proper planning strategies for 2000. I nterest is reportable annually as it accrues, but may be deferred until bonds are cashed, reach final maturity, or are disposed of, whichever occurs first.
Interest is subject to federal tax only - it is exempt from state tax.
Although bonds earn less than market yield - the state tax savings can make up much of the difference. Altered bonds cannot be redeemed. You should return the bond for correction. However, if there is a name change due to marriage, a bond does not need to be reissued. When it is redeemed, the bond is signed with both the maiden and married name.