How to Cash Old Savings Bonds

U.S. savings bonds are debt securities issued by the United States Department of the Treasury to help finance the government’s borrowing needs. These bonds are considered a safe investment because they are backed by the full faith and credit of the U.S. government. Savings bonds were initially introduced to encourage saving among Americans and have historically served various national purposes, including funding wartime efforts. When you redeem a bond, the government repays the original amount plus accrued interest. This guide outlines the process of cashing old savings bonds, providing clarity on identification, preparation, redemption procedures, and tax considerations.

Identifying Your Savings Bonds and Required Information

Identifying the specific type of savings bond you possess is the initial step in the redemption process. Savings bonds can be either paper or electronic, with the most common types being Series EE and Series I bonds. Paper bonds typically have a physical certificate, while electronic bonds are managed through a TreasuryDirect account. Each series has different terms regarding interest accrual and maturity; for instance, Series EE bonds issued after 1980 typically reach maturity after 30 years, ceasing to earn interest at that point.

To determine a paper bond’s current value and maturity date, the TreasuryDirect website offers a bond value calculator where you can input the bond’s serial number, denomination, and issue date. For electronic bonds, this information is readily available by logging into your TreasuryDirect account. Regardless of the bond type, you will need specific information from the bond itself, such as the serial number, the exact issue date, and the owner’s name as printed on the bond. Additionally, for redemption, you will need valid personal identification documents, such as a government-issued photo ID like a driver’s license or passport, to verify your identity.

Preparing for Redemption

Once your savings bond information is gathered, the next step involves preparing for redemption by selecting the appropriate method and completing any necessary forms. Redemption can occur in-person at a qualified financial institution, by mail, or online through your TreasuryDirect account for electronic bonds. The suitable method depends on whether you hold a paper or electronic bond, and if there are special circumstances like a lost bond or a deceased owner. For instance, paper bonds can generally be redeemed at most banks or credit unions, while electronic bonds must be cashed through TreasuryDirect.

If you have a lost, stolen, or destroyed paper bond, you will need to complete FS Form 1522, “Claim for Lost, Stolen, or Destroyed United States Savings Bonds.” This form requires detailed information about the missing bond and your identity. For bonds belonging to a deceased owner, Treasury Form 5336, “Request by an Estate for Payment of United States Savings Bonds,” is typically required, along with supporting legal documentation such as a death certificate and proof of executorship. These forms, along with general redemption forms if needed for mail-in redemptions, can be obtained from the TreasuryDirect website or sometimes from financial institutions. Accurately completing all fields on these forms, using the precise details gathered from your bond and personal identification, is essential before proceeding with the actual redemption.

The Redemption Process

With all required information gathered and forms completed, you can proceed with the actual redemption of your savings bonds. For in-person redemption of paper bonds, you will present the physical bond along with your valid government-issued identification to a teller at a financial institution that offers bond redemption services. The institution will verify the bond and your identity, then process the payment, typically by depositing funds directly into your account or issuing a check. This method often provides immediate access to your funds, assuming the institution can verify the bond’s authenticity and your ownership.

If you choose to redeem paper bonds by mail, you will send the signed bond(s) and any required forms to the Department of the Treasury’s Bureau of the Fiscal Service. The mailing address for bond redemption is generally available on the TreasuryDirect website or on the forms themselves. It is advisable to use a traceable and insured mailing method, such as certified mail with return receipt, to ensure the secure delivery of your valuable documents.

For electronic bonds held in a TreasuryDirect account, the process is entirely online. After logging into your account, you will navigate to your bond holdings, select the specific bond(s) you wish to redeem, and follow the prompts to initiate the redemption request. The funds are typically deposited into the linked bank account within one to two business days following the successful processing of the request.

Reporting Interest for Tax Purposes

When you cash a savings bond, the interest earned is generally subject to federal income tax. However, the interest is exempt from state and local income taxes. This federal tax liability usually arises in the year the bond is redeemed or when it reaches final maturity, whichever comes first, unless an election was made to report the interest annually. Most bondholders defer reporting the interest until redemption, simplifying their annual tax filings.

The U.S. Department of the Treasury typically reports the total interest earned on redeemed bonds to the Internal Revenue Service (IRS) on Form 1099-INT, “Interest Income.” You will receive a copy of this form, which details the amount of interest to be included in your gross income for federal tax purposes. In certain circumstances, the interest from Series EE and Series I savings bonds may be entirely tax-free at the federal level if the proceeds are used to pay for qualified higher education expenses in the same tax year. This education tax exclusion has specific requirements, including income limitations and eligible educational institutions, which must be met to qualify for the tax benefit.