How to Cash a Paper Savings Bond

A paper savings bond is a debt security issued by the U.S. Department of the Treasury, representing a loan from an individual to the U.S. government. These bonds are backed by the full faith and credit of the U.S. government, making them a secure investment. While electronic savings bonds are now the standard, many individuals still hold paper versions.

Understanding Your Paper Savings Bond

Before cashing a paper savings bond, understand who is authorized to redeem it and what documentation is required. The original owner, a co-owner, a beneficiary (upon the original owner’s death), or a legal representative can cash a bond. For instance, a beneficiary generally needs a certified death certificate for the deceased owner, while a legal representative might require court documents such as letters testamentary or guardianship papers.

Paper savings bonds, such as Series EE and I bonds, have a minimum holding period of one year before they can be cashed. If redeemed before five years, a penalty equivalent to the last three months of interest is typically forfeited. Bonds accrue interest for a set period, generally 30 years, after which interest stops accruing. Confirm a bond’s current value and maturity status using the Treasury’s online calculator to ensure you are not missing out on potential interest earnings.

Valid government-issued photo identification is always required to confirm your identity and right to redeem the bond. For minors, a parent or legal guardian must sign the bond and may need to provide proof of guardianship. If a bond is lost, stolen, or destroyed, complete FS Form 1048, “Claim for Lost, Stolen, or Destroyed United States Savings Bonds,” to request a replacement. For deceased owners, have the death certificate and any relevant probate documents prepared in advance before initiating the cashing process.

Cashing Your Bond

Paper savings bonds can typically be cashed in person at a financial institution or by mail directly through the U.S. Treasury. Many banks and credit unions offer savings bond cashing services, though some may require you to be an account holder or may have limits on the amount they will cash. Contact your local bank or credit union beforehand to confirm their specific requirements and service availability.

When cashing a bond in person, present the paper bond and your valid government-issued photo identification to a teller. The bond generally needs to be endorsed by signing the back in the teller’s presence. After verification, the financial institution processes the redemption, and payment can often be received as cash or a direct deposit into an account. Paper bonds must be cashed for their entire value.

Cashing bonds by mail through TreasuryDirect is another option, especially if a local bank does not offer the service or for deceased owners. This method involves using FS Form 1522, “Special Form of Request for Payment of United States Savings and Retirement Securities Where Use of a Detached Request Is Authorized.” Complete the form, providing your personal details, bond information, and direct deposit details for payment. For redemptions exceeding a certain amount, typically over $1,000, a signature certification from a financial institution or notary public may be required on FS Form 1522. The completed form, along with the physical bond(s), is mailed to the address specified on the form, usually Treasury Retail Securities Services. Processing times for mail-in requests can vary, ranging from a few weeks to several months, depending on the complexity of the request and Treasury volume.

Taxation of Savings Bond Interest

Interest earned on savings bonds is subject to federal income tax but exempt from state and local income taxes. This makes savings bonds potentially attractive for individuals residing in states with high income tax rates.

Bondholders have two primary options for reporting the interest income. They can choose to report the interest annually as it accrues, or they can defer reporting all interest until the bond matures or is cashed, whichever occurs first. Most individuals defer reporting the interest until redemption, simplifying their annual tax filings.

When a savings bond is cashed, the U.S. Treasury or the cashing financial institution will issue Form 1099-INT, which reports the total interest paid during the year. If the bond was transferred or reissued, the Form 1099-INT might include interest earned before your ownership. In such cases, consult IRS Publication 550 for guidance on reporting only the interest accrued during your holding period.