U.S. Treasuries . Interest earned on Treasuries is exempt from state and local income taxes but not your federal income taxes. U.S. savings bonds .
Interest earned on savings bonds is also exempt from state and local income taxes.
When you redeem a savings bond at a bank, the bank gives you a statement of how much interest you must report to the IRS as interest income. Series EE and Series HH bonds are the two main types of savings bonds. Series EE bonds are sold to investors at a 50 percent discount to their face value. You don't receive an actual interest payment on Series EE bonds. Instead, the IRS requires that you report imputed interest earned on the bond.