How to Turn In a Savings Bond: The Process

United States savings bonds are a secure and accessible investment backed by the federal government. Understanding the proper redemption process ensures a smooth experience when accessing these funds. This guide outlines the steps involved in turning your savings bond into cash, from preparing documents to understanding tax considerations.

Determining Eligibility and Preparing Your Bond

Before redemption, confirm your bond’s eligibility and gather necessary documentation. Both Series EE and Series I savings bonds begin earning interest from their issue date and can be redeemed after a minimum holding period of one year. Redeeming a bond before five years of ownership results in a forfeiture of the last three months of interest. These bonds accrue interest for 30 years from their issue date, at which point they reach final maturity.

The registered owner or a named co-owner can redeem a savings bond. For a deceased owner, a named beneficiary or legal representative of the estate may be authorized. You will need valid government-issued photo identification, such as a driver’s license or passport, and your Social Security Number. If your name has changed since the bond was issued, provide official documentation of the name change, such as a marriage certificate.

Bank account details, including routing and account numbers, are required for direct deposit. For physical paper bonds, the original bond certificate must be available. If you hold electronic bonds, access to your TreasuryDirect account details is necessary for verification.

Choosing Your Redemption Method

Your redemption method depends on whether your bond is paper or electronic, and your preference for in-person or online processing. Local financial institutions, such as banks and credit unions, often redeem paper savings bonds. Contact your chosen institution beforehand, as some banks may only redeem bonds for existing account holders or those with an account for a certain duration.

For electronic bonds, or paper bonds not redeemable at a local bank, TreasuryDirect is the primary avenue. TreasuryDirect is the U.S. Department of the Treasury’s online platform where electronic bonds are held and managed. This platform handles paper bonds requiring specific processing, such as those for deceased owners or those needing signature certification beyond what a local bank provides. The method chosen depends on the bond type, redemption amount, and convenience of the channel.

Executing the Redemption

After preparing your bond and gathering documents, submit your redemption request. To redeem a paper bond at a financial institution, present the physical bond and identification to a bank employee. You will sign the bond in the presence of the bank official, who will certify your signature. Confirming your direct deposit details ensures funds are transferred to your designated bank account.

For electronic bonds, the redemption process is completed online through your TreasuryDirect account. Log in, navigate to “ManageDirect,” and select the option to redeem securities. The system allows you to select bonds for redemption and designate the bank account for direct deposit.

If redeeming paper bonds by mail to TreasuryDirect, complete FS Form 1522, “Special Form of Request for Payment of United States Savings and Retirement Securities.” If the total redemption value exceeds $1,000, your signature on FS Form 1522 must be certified by a notary public or an authorized certifying officer from a financial institution. Mail the completed form, along with the physical paper bonds, to the address provided on the form.

Understanding Your Payment and Tax Obligations

After a savings bond redemption request is processed, funds are typically deposited directly into your specified bank account. For electronic bonds redeemed through TreasuryDirect, payment is usually credited within two business days. Processing times for mailed paper bonds may vary but generally involve a longer timeframe.

Interest earned on savings bonds is subject to federal income tax. The interest is exempt from state and local income taxes. Most bondholders defer reporting this interest until the bond is redeemed or reaches final maturity, whichever occurs first. Upon redemption, the financial institution or TreasuryDirect will issue a Form 1099-INT, “Interest Income,” which details the total interest earned for federal income tax reporting.

Interest from savings bonds may be excluded from federal income tax if proceeds pay for qualified higher education expenses. This exclusion applies to Series EE and Series I bonds issued after 1989. To qualify, conditions include income limitations and the bond owner being at least 24 years old when the bond was issued. Qualified education expenses include tuition and fees for an eligible educational institution, but typically not room and board. Taxpayers claiming this exclusion utilize IRS Form 8815.