How to Cash In Savings Bonds That Have Matured

Savings bonds are a long-standing method for individuals to save money, backed by the full faith and credit of the U.S. government. These financial instruments are designed to accrue interest over time, providing a secure investment option. When a savings bond reaches its final maturity date, it stops earning interest, signaling the opportune moment for its holder to consider redemption. Cashing in these matured bonds involves several steps, from confirming eligibility to navigating the appropriate channels for receiving funds. This guide clarifies these procedures for those looking to convert their savings bonds into cash.

Determining Maturity and Eligibility

Before initiating the redemption process, it is important to confirm that a savings bond has reached its final maturity and to verify who is authorized to redeem it. Savings bonds, depending on their series and issue date, have different maturity periods. For example, Series EE bonds issued after May 2003 stop accruing interest after 20 years, while those issued between May 1981 and April 2003 stop after 30 years. Series I bonds typically stop accruing interest after 30 years from their issue date. The TreasuryDirect website offers a bond value calculator, a valuable tool for determining the current value of a bond and its final maturity date by inputting the series, denomination, and issue date.

Eligibility to redeem a savings bond generally rests with the registered owner or co-owner. If the bond is held jointly, either listed individual can typically redeem it. In situations where the original owner is deceased, the bond may be redeemed by the rightful legal representative, such as an executor of an estate or an administrator, after proper documentation establishing their authority has been provided. This verification step ensures the bond is properly matured and that the individual presenting it for redemption has the legal right to do so.

Required Documentation and Information

To successfully redeem a matured savings bond, gathering the necessary documentation and information beforehand streamlines the process. For physical paper bonds, the original bond certificate is required. Valid, government-issued identification, such as a driver’s license, state ID card, or passport, is necessary to confirm the identity of the person redeeming the bond. Financial institutions will use this identification to verify the bondholder’s identity against their records or the information printed on the bond.

It is also important to provide bank account information for direct deposit, as most redemptions are processed electronically to an account. This typically includes the bank routing number and the account number. For paper savings bonds, the individual listed as the owner or co-owner must sign the back of the bond in the presence of an authorized certifying officer at a financial institution. In cases involving a deceased owner, additional documentation, such as a certified copy of the death certificate and proof of executorship or administration, may be required to establish legal entitlement to the bond proceeds.

Redemption Methods

Once all necessary documentation is prepared, matured savings bonds can be redeemed through two primary methods: at a local financial institution or directly through TreasuryDirect. Redeeming a paper savings bond at a local bank or credit union involves the bondholder presenting the physical bond along with their government-issued identification. The financial institution will verify the bond’s authenticity and the identity of the presenter, often requiring the bond to be signed in their presence. Funds are typically deposited directly into a checking or savings account, which may take a few business days to process.

For electronic savings bonds, redemption is exclusively handled through the TreasuryDirect online system. Account holders can log into their TreasuryDirect account, select the bond they wish to redeem, and initiate the transaction. The funds are then electronically transferred to the linked bank account, a process that usually takes one to two business days. Paper savings bonds can also be redeemed by mail through TreasuryDirect if a financial institution does not offer the service or for amounts exceeding typical bank redemption limits. This involves completing specific forms, such as FS Form 1522, and mailing the signed bond and forms to the Department of the Treasury.

Tax Implications

The interest earned on savings bonds is subject to specific tax rules. This interest is generally subject to federal income tax. However, savings bonds are exempt from state and local income taxes. This means that while the earnings contribute to an individual’s federal taxable income, they are not factored into state or local tax calculations.

Bondholders have two primary options for reporting the interest earned on their savings bonds for federal tax purposes. They can choose to report the interest annually as it accrues, or they can defer reporting all of the interest until the bond is redeemed, reaches final maturity, or is disposed of, whichever comes first. The accrued interest is reported on IRS Form 1099-INT, which is typically issued by the financial institution or TreasuryDirect when the bond is redeemed or reaches final maturity. In certain circumstances, the interest earned on qualified Series EE or I bonds may be excluded from federal income tax if the proceeds are used to pay for qualified higher education expenses, subject to income limitations and other IRS requirements.