How to Cash Out Savings Bonds Online or at a Bank

Savings bonds are a secure, low-risk investment issued by the U.S. Department of the Treasury. These debt securities are backed by the full faith and credit of the U.S. government, making them a safe way to save money. This guide provides information on how to redeem your savings bonds, whether held online or in paper form.

Eligibility and Requirements for Cashing Out

The ability to cash out a savings bond depends on its type and how long it has been held. The two primary types of savings bonds are Series EE bonds and Series I bonds. Series EE bonds accrue interest for up to 30 years and are guaranteed to double in value by their 20-year mark, while Series I bonds feature an interest rate that adjusts based on inflation, in addition to a fixed rate.

Both Series EE and Series I bonds can be cashed after a minimum holding period of one year from their issue date. However, cashing a bond before it has been held for five years will result in a penalty, where the last three months of interest earned are forfeited. For instance, a bond redeemed after 24 months would only receive 21 months of interest.

To cash a bond, the person presenting it must be the registered owner, a co-owner, a beneficiary, or a legal representative with proper documentation. Mandatory identification documents, such as a government-issued photo ID like a driver’s license or passport, are required. Your Social Security number will also be necessary for the transaction.

A distinction exists between physical paper bonds and electronic bonds held in a TreasuryDirect account. Paper bonds must be cashed for their entire value, meaning partial redemptions are not possible with physical certificates. Conversely, electronic bonds held in TreasuryDirect allow for partial redemptions, provided at least $25 is cashed and a minimum of $25 remains in the account.

Where to Cash Savings Bonds

Several venues are available for cashing savings bonds, depending on whether you hold a paper or electronic bond. Many local financial institutions, including banks and credit unions, offer services for cashing paper savings bonds. It is advisable to contact your specific bank or credit union beforehand to confirm their policy, as not all institutions provide this service, or they may have limits on the amount they will cash.

For electronic savings bonds, the TreasuryDirect website serves as the dedicated online platform for managing and redeeming these investments. This digital platform allows account holders to conduct transactions directly with the U.S. Treasury. In certain circumstances, particularly for larger denominations, complex ownership situations, or if a local bank cannot assist, bonds can be redeemed by mail directly with the Treasury.

The mail-in option involves sending the bond along with a specific form to a Treasury processing center. This method is also used for Series HH bonds, which cannot be cashed at a bank.

Step-by-Step Cashing Process

Cashing paper savings bonds at a financial institution involves a direct, in-person process. First, gather your paper bond(s) and the necessary identification documents, such as a government-issued photo ID and your Social Security number. It is recommended to call your bank or credit union in advance to confirm they cash savings bonds and understand any specific requirements they may have.

Once at the financial institution, present your bond(s) and identification to a bank official. You will sign the bond(s) in the presence of the official to authenticate the transaction. After verification, the bank will process the redemption and provide you with payment, either as cash or a deposit into your account.

For electronic bonds held in a TreasuryDirect account, the process is completed online. Begin by logging into your TreasuryDirect account using your account number and password. Navigate to the “ManageDirect” section, then locate and select the “Redeem securities” option, or a similar link such as “Manage My Securities.”

From there, you will select the specific bonds you wish to cash and indicate the bank account where the funds should be deposited. After reviewing the details, confirm the transaction. Funds from electronic bond redemptions are transferred to your designated bank account within two business days.

Cashing bonds by mail is an alternative for specific situations. This requires completing FS Form 1522, a Special Form of Request for Payment of United States Savings and Retirement Securities. You will need to sign this form, and if the redemption amount exceeds $1,000, your signature may require certification by a notary public or an authorized certifying officer at a financial institution. Along with the completed and signed form, include your Social Security number and direct deposit information for payment. The physical bond(s) and the form are then mailed to the address provided on the form, which directs them to the Treasury’s processing center.

Understanding Savings Bond Taxation

Interest earned on savings bonds is subject to federal income tax. Taxpayers have the option to report this interest annually as it accrues or defer reporting it until the bond matures, is redeemed, or is otherwise disposed of. Most individuals choose to defer reporting the interest until they cash the bond, which means the entire accumulated interest becomes taxable in the year of redemption.

A notable advantage of savings bond interest is its exemption from state and local income taxes. This means that while the interest adds to your federal taxable income, it is not factored into your state or local tax calculations. This exemption applies universally across all states.

When you cash a savings bond and the interest earned totals $10 or more, the Treasury or the financial institution processing the redemption will issue a Form 1099-INT. This form reports the amount of interest earned during the tax year. You will use the information from this form when filing your federal income tax return.