How and Where to Cash Paper Savings Bonds

U.S. paper savings bonds, such as Series EE and Series I bonds, are a long-term savings vehicle backed by the federal government. They earn interest, providing a secure savings method. Though designed for extended holding, bonds can be redeemed after meeting specific requirements.

Preparing to Cash Your Bond

Before cashing a paper savings bond, understand its maturity and gather necessary documents. Savings bonds can generally be cashed one year after their issue date. However, cashing a bond before five years will result in a forfeiture of the last three months of interest earned. Series EE and Series I bonds continue to earn interest for up to 30 years from their issue date, at which point they mature and stop accruing further interest.

A valid government-issued photo identification, such as a driver’s license or passport, is required. Some financial institutions may request a second form of identification. If the name on the bond differs from the current identification, proof of the name change, like a marriage certificate, may be necessary. The bond’s owner or owners must sign the back of the bond, ideally in the presence of an authorized official at the cashing location. For bonds valued at $1,000 or more, a certified signature, often obtained from a bank or credit union, may be required.

Ensure the paper bond is in good condition. Financial institutions may decline to cash damaged or altered bonds. In such instances, the bond might need to be submitted directly to the U.S. Department of the Treasury for processing.

Where to Cash Your Bond

Many banks and credit unions offer services to cash paper savings bonds. It is advisable to contact the specific financial institution beforehand, as some may require you to be an existing account holder or have specific policies regarding bond redemptions. During the in-person transaction, present the bond and identification; the institution will verify authenticity and identity.

Alternatively, paper savings bonds can be redeemed through TreasuryDirect, the U.S. Department of the Treasury’s online system. This process involves creating an online account and converting the paper bond into an electronic security. After conversion, the bond can be redeemed directly through TreasuryDirect.

For paper bonds submitted by mail to TreasuryDirect, complete FS Form 1522. This form often requires a certified signature, especially for bonds exceeding $1,000 in value. Once processed through TreasuryDirect, funds are usually transferred to your designated bank account within two business days.

Cashing Bonds in Unique Situations

Cashing savings bonds involves unique considerations for bonds held by minors or deceased individuals. For bonds registered in a minor’s name, a parent or legal guardian can typically cash the bond on the child’s behalf. This is generally permitted if the child is too young to understand the request for payment, and the parent either resides with the child or has legal custody. The parent or guardian will need to provide documentation proving their relationship to the minor, and specific language may need to be written on the back of the bond.

When a registered bond owner passes away, the bond becomes part of their estate. A surviving co-owner listed on the bond can typically redeem it by presenting a copy of the death certificate. If no surviving co-owner, the executor of the deceased owner’s estate may cash the bond, requiring documents like the death certificate and probate documents or proof of executorship. In such cases, Treasury Form FS Form 1522 might be used to submit the bond for redemption to the U.S. Treasury.

Lost, stolen, or destroyed paper savings bonds can be addressed. The U.S. Treasury offers a process to replace or cash these bonds via FS Form 1048. If a replacement is issued for an EE or I bond, it will be electronic within a TreasuryDirect account, requiring the owner to establish one if they do not already have one.

Understanding Tax Implications

Interest earned on savings bonds is subject to federal income tax. This tax is typically due in the year the bond is cashed or reaches final maturity, unless the bondholder elected to report interest annually. Financial institutions or TreasuryDirect issue Form 1099-INT to report total interest earned when a bond is redeemed, which must be included in federal tax filings.

Savings bond interest is exempt from state and local income taxes. Interest income from savings bonds is reported on the federal income tax return with other interest income.

Under specific conditions, interest earned on Series EE and Series I savings bonds issued after 1989 may be excluded from federal income tax if used for qualified higher education expenses. To qualify, the bond owner must have been 24 years or older when the bond was issued, and the exclusion is subject to income limitations based on modified adjusted gross income. Qualified expenses typically include tuition and fees for an eligible educational institution, but generally exclude costs such as room, board, and books. Taxpayers claiming this exclusion will use IRS Form 8815.