How to Cash In Old Savings Bonds

Savings bonds are a unique type of U.S. Treasury security, allowing individuals to lend money to the government and earn interest over time. These low-risk investments have been a popular savings vehicle. Understanding the proper procedures for converting these assets into cash is important. This guide outlines the steps involved in cashing in your savings bonds, ensuring a smooth and efficient process.

Verifying Your Bond’s Status and Value

Before initiating the redemption process, determine the current status and value of your savings bonds. The method for checking this information varies depending on whether you possess paper or electronic bonds. Electronic Series EE and Series I bonds are managed through your TreasuryDirect account, where their current value is readily accessible.

For paper savings bonds, which include Series EE, Series I, and older Series HH bonds, their value can be determined using the online Savings Bond Calculator on the TreasuryDirect website. To utilize this tool, input specific details from the bond, such as its series, denomination, and issue date. The calculator will then provide an accurate valuation, including any accrued interest.

Understanding the maturity dates of your bonds is important, as interest accrual ceases once a bond reaches its final maturity. Series EE and Series I bonds generally have a total maturity period of 30 years from their issue date. Older Series HH bonds typically reached final maturity after 20 years.

Preparing for Redemption

Gathering the necessary information and documents before attempting to cash your savings bonds streamlines the redemption process. You will need a valid government-issued photo identification, such as a driver’s license or passport, to confirm your identity. The Social Security Number of the bond owner or owners is required for tax and identification purposes.

For direct deposit of the redemption funds, you will need to provide your bank account information, specifically the routing and account numbers. If you possess electronic bonds, ensuring you have active access to your TreasuryDirect account is necessary, as this platform is used for online redemption.

In situations where paper bonds are lost, stolen, or damaged, or if the original owner is deceased, specific Treasury forms are required. For lost, stolen, or destroyed bonds, complete FS Form 1048, which is a claim form used to request replacement or payment. This form requires details about the missing bonds and often needs to be signed in the presence of a notary or certifying officer. If a bond owner is deceased, specific documentation and potentially FS Form 5336 may be needed to establish the entitlement of the individual seeking to redeem the bonds.

Redeeming Your Savings Bonds

Once all preparatory steps are complete, you can proceed with the redemption of your savings bonds, with the process differing for paper and electronic bonds. For paper savings bonds, a common method involves visiting a local bank or credit union that offers bond cashing services. It is advisable to call the financial institution beforehand to confirm they cash savings bonds and inquire about any specific requirements, as some may only provide this service to existing account holders or have limits on the amount they will cash at one time.

During the in-person transaction, you will present the physical paper bond(s) along with your valid government-issued identification to the teller. The bank will then verify the bond and your identity. After successful verification, the funds from the redeemed bond can typically be received either through a direct deposit to your bank account or via a check. For paper bonds, the entire value of the bond must be cashed; partial redemption is not an option.

Electronic savings bonds held in a TreasuryDirect account are redeemed through an online process. You begin by logging into your TreasuryDirect account. Within the account, you will navigate to the “ManageDirect” section and select “Redeem securities” or “Current Holdings.” You can select the specific bonds you wish to cash and confirm the direct deposit to your linked bank account.

Electronic redemptions typically process quickly, with funds often becoming available in your linked bank account within one to two business days. Unlike paper bonds, electronic bonds allow for partial redemption, provided you redeem at least $25 and leave a minimum of $25 remaining on the bond.

Tax Considerations

Interest earned on savings bonds is subject to federal income tax, which must be reported in the year the bond is cashed or when it reaches final maturity, whichever occurs first. This interest is generally exempt from state and local income taxes. This federal taxation applies to the accumulated interest, not the original principal amount.

Upon redemption, the financial institution or the U.S. Treasury will issue IRS Form 1099-INT, which reports the interest income earned on the bond. This form is for accurately filing your federal income tax return. In specific circumstances, such as using the bond proceeds for qualified higher education expenses, the interest may be partially or entirely exempt from federal income tax, though income limitations apply to this exclusion. It is always advisable to consult with a qualified tax professional for personalized advice, as individual tax situations can vary considerably.