How To Cash In Savings Bonds

  Savings bonds are a type of government debt that you can buy and hold for a certain period of time, earning interest along the way. They are a safe and reliable way to save money for the future, or to give as gifts to your loved ones. But what if you need to cash in your savings bonds? How do you do it, and what are the things you need to know?

In this blog post, I will show you how to cash in savings bonds, from finding out their value and maturity date, to choosing where and how to redeem them. I will also explain the tax implications, fees, and benefits of cashing in your savings bonds. I will also answer some frequently asked questions and give you some tips and warnings to help you make the best use of your savings bonds. Let’s get started!

What Are Savings Bonds?

Savings bonds are a form of federal government debt that you can buy and hold for a certain period of time, earning interest along the way. They are issued by the U.S. Treasury and backed by the full faith and credit of the U.S. government. They are generally considered to be safe, low-risk investments, as they are guaranteed to never lose value and are protected from inflation.

Savings bonds can be purchased for yourself or given as gifts. You can buy them online at TreasuryDirect.gov, or through your employer’s payroll deduction plan. You can also buy paper savings bonds at some banks and financial institutions, or through the mail.

There are two types of savings bonds that are currently sold by the U.S. Treasury: Series EE and Series I savings bonds. Both types earn interest for up to 30 years, and can be redeemed any time after 12 months. However, if you redeem them before five years, you will lose the last three months of interest as a penalty.

Series EE savings bonds are sold at face value, meaning that you pay the same amount as the bond’s denomination. For example, if you buy a $50 Series EE bond, you pay $50. Series EE bonds earn a fixed rate of interest, which is set at the time of purchase. The current interest rate for Series EE bonds bought from May 2021 through October 2021 is 0.10%.

Series I savings bonds are sold at face value, meaning that you pay the same amount as the bond’s denomination. For example, if you buy a $50 Series I bond, you pay $50. Series I bonds earn a variable rate of interest, which is composed of two parts: a fixed rate and an inflation rate. The fixed rate is set at the time of purchase, and the inflation rate is adjusted every six months based on the Consumer Price Index. The current interest rate for Series I bonds bought from May 2021 through October 2021 is 3.54%.

How to Find Out the Value and Maturity Date of Your Savings Bonds

Before you cash in your savings bonds, you need to find out their value and maturity date. The value of your savings bonds is how much they are worth today, based on the interest they have earned. The maturity date of your savings bonds is when they stop earning interest, and you should redeem them.

You can find out the value and maturity date of your savings bonds by using the Savings Bond Calculator at TreasuryDirect.gov. You just need to enter the type, denomination, serial number, and issue date of your savings bonds, and the calculator will show you their current value, interest rate, next accrual date, final maturity date, and year-to-date interest.

You can also use the Savings Bond Wizard, a downloadable software that you can install on your computer, to track and manage your savings bonds. You can enter your savings bond information manually, or import it from a file or a scanner. The Savings Bond Wizard will show you the same information as the Savings Bond Calculator, and also let you print or save reports, sort and filter your savings bonds, and update their values automatically.

How to Choose Where and How to Redeem Your Savings Bonds

Once you know the value and maturity date of your savings bonds, you can choose where and how to redeem them. You have several options, depending on the type and format of your savings bonds, and your personal preference.

Electronic Savings Bonds

If you have electronic savings bonds in your TreasuryDirect account, you can redeem them online at TreasuryDirect.gov. You just need to log in to your account, go to ManageDirect, and use the link for redeeming securities. You can redeem any amount of $25 or more, up to the full value of your savings bonds. You can also choose to receive your money by direct deposit to your bank account, or by check.

Paper Savings Bonds

If you have paper savings bonds, you can redeem them at a bank or a financial institution that is authorized to cash savings bonds. You can find a list of authorized agents at TreasuryDirect.gov. You will need to provide a valid ID, such as a driver’s license, passport, or state ID card, and sign the back of your savings bonds in front of the bank officer. You will receive your money in cash, or by check or deposit to your bank account.

You can also redeem your paper savings bonds by mail, by sending them to the Treasury Retail Securities Services. You will need to fill out FS Form 1522, and have your signature certified by a bank officer. You will also need to provide your Social Security number, your bank account information, and your mailing address. You will receive your money by direct deposit to your bank account, or by check.

How to Report and Pay Taxes on Your Savings Bonds

When you cash in your savings bonds, you will have to report and pay taxes on the interest they have earned. The interest on your savings bonds is subject to federal income tax, but not state or local income tax. You can choose to report and pay taxes on your savings bond interest every year as it accrues, or defer it until you redeem your savings bonds or they reach maturity.

If you choose to report and pay taxes every year, you will receive a 1099-INT form from the Treasury or your bank, showing the interest you have earned on your savings bonds. You will need to include this amount on your federal income tax return, and pay the appropriate tax rate.

If you choose to defer taxes until you redeem your savings bonds or they reach maturity, you will receive a 1099-INT form from the Treasury or your bank, showing the interest you have earned on your savings bonds since you bought them. You will need to include this amount on your federal income tax return, and pay the appropriate tax rate.

You may be able to exclude some or all of the interest on your savings bonds from federal income tax, if you use the money for qualified higher education expenses, such as tuition, fees, and books. To qualify for this exclusion, you must meet certain requirements, such as:

  • You must be the owner of the savings bonds, and at least 24 years old when you bought them.
  • You must use the money for yourself, your spouse, or your dependent.
  • You must redeem the savings bonds in the same year that you pay the education expenses.
  • You must meet the income limits for the year that you redeem the savings bonds.

You can find more information about the education savings bond program at IRS.gov.

Frequently Asked Questions

Here are some common questions and answers about cashing in savings bonds:

  • Can I cash in a savings bond that is not in my name? No, you can only cash in a savings bond that is in your name, or in your name and another person’s name. If you have a savings bond that is in someone else’s name, you will need to have a legal document that proves you are entitled to cash it, such as a death certificate, a court order, or a power of attorney.
  • Can I cash in a savings bond that is lost, stolen, or damaged? Yes, you can cash in a savings bond that is lost, stolen, or damaged, by applying for a replacement or a payment. You will need to fill out FS Form 1048, and provide as much information as possible about the savings bond, such as the type, denomination, serial number, issue date, and owner’s name. You will also need to provide a valid ID, and a proof of loss, theft, or damage, such as a police report, a fire report, or a statement from a bank officer. You will receive your money by direct deposit to your bank account, or by check.
  • Can I cash in a savings bond that is expired or postdated? No, you cannot cash in a savings bond that is expired or postdated. An expired savings bond is a savings bond that has stopped earning interest, and you should redeem it as soon as possible. A postdated savings bond is a savings bond that is dated for a future date, and you cannot redeem it until that date. You can find out the maturity date of your savings bond by using the Savings Bond Calculator or the Savings Bond Wizard.

Tips and Warnings

Here are some tips and warnings to help you make the best use of your savings bonds:

  • Only cash in your savings bonds if you need the money or they have stopped earning interest. Savings bonds are a long-term investment that can earn a decent return over time, especially if you buy them when the interest rates are high. You should only cash in your savings bonds if you need the money for an emergency or a specific goal, or if they have reached their maturity date and have stopped earning interest. Otherwise, you may lose some of the interest and the tax benefits of your savings
  • Compare the interest rates and the tax benefits of your savings bonds before cashing them in. Savings bonds have different interest rates and tax benefits, depending on when and how you bought them. You should compare the interest rates and the tax benefits of your savings bonds before cashing them in, to see which ones are more valuable and which ones are less valuable. You may want to cash in the less valuable ones first, and keep the more valuable ones for later. You can use the Savings Bond Calculator or the Savings Bond Wizard to compare your savings bonds.
  • Keep a record of your savings bonds and their redemption. You should keep a record of your savings bonds and their redemption, for your own reference and for tax purposes. You should keep the receipts, statements, or forms that show the value and the interest of your savings bonds, and the date and the amount of their redemption. You should also keep copies of your savings bonds, or write down their serial numbers, in case they are lost, stolen, or damaged.

Conclusion

Cashing in savings bonds is a simple and easy process, but it also involves some decisions and considerations. You need to find out the value and maturity date of your savings bonds, choose where and how to redeem them, and report and pay taxes on the interest they have earned. You also need to weigh the pros and cons of cashing in your savings bonds, and compare the interest rates and the tax benefits of your savings bonds.