How to Cash US Savings Bonds: What You Need to Know
Navigate the process of converting your US savings bonds into cash with this comprehensive guide, covering identification, preparation, and financial considerations.
US savings bonds are debt securities issued by the U.S. Department of the Treasury. They are a secure savings vehicle where individuals lend money to the U.S. government, which promises to pay it back with interest. This article guides you through the process of cashing your US savings bonds.
Identifying Your US Savings Bonds
The type of US savings bond determines the cashing process. Bonds are issued in two formats: paper and electronic. Electronic bonds are held digitally in an online account, while paper bonds are physical certificates.
The most common series are Series EE and Series I. Identify the series by examining the physical certificate for paper bonds or by logging into your TreasuryDirect account for electronic bonds. Each bond has an issue date, marking when it began earning interest. Most savings bonds have a minimum holding period of one year before cashing, and a five-year period to avoid an interest penalty. Check the current value of a paper bond using the TreasuryDirect website’s online bond value calculator, or view your electronic bonds directly within your TreasuryDirect account.
Gathering Required Information and Documents
Gather all necessary information and documents before cashing any US savings bond. You will need valid personal identification (e.g., driver’s license, state ID, or passport). The name on your identification must match the name registered on the bond.
Accurate bank account information is required for direct deposit, including routing and account numbers. For paper bonds, you must have the physical certificate. For electronic bonds, your TreasuryDirect account login credentials are necessary. If the bond owner is deceased, additional documentation like a death certificate, probate documents, or proof of executorship may be required.
Cashing Electronic Savings Bonds Through TreasuryDirect
Cashing electronic savings bonds is a straightforward online process through your TreasuryDirect account. Log in using your credentials; this portal provides access to your bond holdings.
Once logged in, navigate to the section to manage or redeem bonds. Select specific bonds or portions to cash. Enter the desired cashing amount, full or partial. After confirming, select the bank account for direct deposit. Funds are typically deposited within two business days.
Cashing Paper Savings Bonds
Cashing paper savings bonds requires either visiting a financial institution or mailing the bond to the Treasury. First, endorse the bond by signing the back of the certificate; your signature should match the name on the bond.
Many banks and credit unions may cash paper savings bonds for customers. Call your financial institution beforehand to confirm their policy and requirements, such as being an account holder. Alternatively, mail the endorsed paper bond directly to TreasuryDirect for redemption. If mailing, consider using certified mail or a trackable service for safe delivery. Funds are typically deposited into your designated bank account within approximately two weeks.
Understanding Proceeds and Tax Reporting
After your US savings bond is cashed, proceeds (original principal and accrued interest) will be directly deposited into your specified bank account. This direct deposit is the standard method for receiving funds.
Interest earned on US savings bonds is subject to federal income tax but exempt from state and local income taxes. Report this interest income in the year the bond is cashed or reaches final maturity, whichever occurs first. The financial institution or TreasuryDirect will issue IRS Form 1099-INT, reporting the interest income. In some instances, interest may be excluded from federal taxation if bond proceeds are used for qualified higher education expenses, subject to specific income limitations and IRS requirements.