How to Cash In Treasury Bonds: Savings & Marketable Bonds

Treasury bonds represent a stable investment, providing a secure way to save money with the backing of the U.S. government. Bondholders may need to access their invested funds due to maturity or an earlier financial need. This guide clarifies the processes for redeeming U.S. Savings Bonds or selling marketable Treasury securities.

Identifying Your Treasury Bond Type

The type of Treasury bond you hold dictates the method for cashing it in. U.S. Treasury bonds are broadly categorized into two main types: U.S. Savings Bonds and marketable Treasury securities. Each type serves different investment purposes and has distinct characteristics.

U.S. Savings Bonds, such as Series EE and Series I bonds, are typically purchased for long-term savings and often offer inflation protection. These bonds are commonly issued electronically through TreasuryDirect, though many older paper bonds remain in circulation. Electronic bond values can be verified via TreasuryDirect; paper bonds can be assessed using the TreasuryDirect website’s bond value calculator, requiring the bond’s series, denomination, and issue date.

Marketable Treasury securities encompass Treasury Bills, Notes, and Bonds, which are actively traded on the open market. These securities are characterized by their face values, defined maturity dates, and regular interest payments. Marketable securities are typically held in book-entry form, either directly through TreasuryDirect or within a commercial brokerage account. Every marketable Treasury security has a unique nine-character CUSIP (Committee on Uniform Securities Identification Procedures) number that identifies the security type and its maturity date, which is crucial for tracking and trading.

Preparing for Redemption or Sale

Gathering necessary information and documentation streamlines the process of cashing in your Treasury bonds.

You will need to compile essential personal identification details, including your full legal name, current mailing address, and your Social Security Number (SSN) or Taxpayer Identification Number (TIN). A valid government-issued photo identification, such as a driver’s license or passport, will also be required for verification purposes. For the bonds themselves, specific information like serial numbers, registration details, and issue dates for Savings Bonds, or CUSIP numbers and account numbers for marketable securities held with a broker or TreasuryDirect, are necessary.

Financial information is also crucial, particularly the routing and account numbers for the bank account where you wish to receive the funds via direct deposit. If paper forms are needed, such as FS Form 1522 for paper Savings Bonds, these can be obtained from the TreasuryDirect website or a financial institution. These forms require completion with personal, bond, and bank details, ensuring accuracy before submission.

Cashing In Savings Bonds

Redeeming U.S. Savings Bonds differs based on whether the bond is electronic or paper. Electronic Savings Bonds are managed through a TreasuryDirect account, offering a straightforward redemption process. Log in, navigate to “ManageDirect,” select “Redeem securities,” choose the bonds, and confirm the transaction. Funds are typically deposited within two business days. A minimum redemption amount of $25 is required, and if cashing only a portion of a bond, at least $25 must remain in the account.

Paper Savings Bonds require an in-person visit to a financial institution or submission by mail. Many banks and credit unions offer redemption services for paper bonds; contact them beforehand to confirm their policies, as some may require you to be an existing account holder. When redeeming in person, you will generally need to present the bond, a valid photo identification, and sign the bond in front of a bank official. Alternatively, paper bonds can be mailed to the Treasury Retail Securities Services using FS Form 1522, which requires bond details, taxpayer identification, and bank information for direct deposit. If the total value of the bonds being cashed exceeds $1,000, your signature on FS Form 1522 must be certified, often by a financial institution.

Selling Marketable Treasury Securities

Selling marketable Treasury securities (Bills, Notes, and Bonds) depends on where they are held. If held in a TreasuryDirect account, a preliminary step is required before sale. Securities purchased through TreasuryDirect must be transferred to a commercial brokerage account for sale on the secondary market. This transfer typically requires providing the receiving brokerage firm’s wire name, routing number, and account details. Once the securities are successfully transferred, the brokerage firm can then execute the sale on your behalf.

For marketable securities already held in a brokerage account, the selling process is initiated directly through your broker. You can typically place a sell order through the brokerage firm’s online trading platform or by contacting a broker. This involves specifying the security by its CUSIP number and the quantity you wish to sell. While TreasuryDirect does not charge fees for buying or redeeming securities, selling marketable securities through a brokerage firm may incur standard transaction fees or commissions. It is generally advisable to understand any associated costs before executing a sale.

Post-Redemption Steps

After completing the redemption or sale of your Treasury bonds, several important steps follow, primarily concerning the receipt of funds and tax obligations. Funds from redeemed Savings Bonds or sold marketable securities are typically disbursed via direct deposit to your linked bank account. For electronic Savings Bonds redeemed via TreasuryDirect, funds are usually credited within two business days. If paper Savings Bonds are mailed for redemption, the direct deposit process may take a few weeks.

Interest earned on Treasury bonds is subject to federal income tax, but it is exempt from state and local income taxes. This tax treatment applies to all types of Treasury securities. For tax reporting purposes, the Treasury or your brokerage firm will issue IRS Form 1099-INT (Interest Income) by January 31 of the year following the redemption or sale. This form details the interest earned, which must be reported on your federal income tax return. Retain records of your redemption or sale transactions for tax filings, as the 1099-INT for Savings Bonds will report all interest accrued over the bond’s lifetime.