Whether you have a paper or electronic savings bond will determine where you can cash it in.
Paper bonds
Your bank or credit union should be able to cash in your paper savings bonds. If you’re going to a financial institution where you’re not a member or customer, check to see if they’ll cash your bond before you go.
Confirm what documents you’ll need to bring with you by contacting the bank. Here’s what you should bring with you in general.
It’s important to remember that bonds can’t be cashed by just anyone. Savings bonds can only be cashed by the bond owner or co-owner, which includes “survivors,” or those identified on the bond who received ownership after the original owner died. You are not the registered owner (a savings bond is nontransferable) and cannot cash in the bond if you purchased it through an auction site like eBay.
If the child is too young to sign the payment request and the child lives with the parent or the parent has legal custody of the child the parent may cash in the child’s savings bond.
Anyone else who wants to cash in a bond must show proof of legal authority to do so.
You’ll sign each bond and receive the cash value at the bank. The bank will either hand you a 1099 tax form or mail it to you before the end of the tax year after you’ve cashed in your bond.
Paper bonds can also be redeemed through the mail. To cash in by mail, obtain an FS Form 1522 from the US Department of Treasury, have your signature certified, then mail the form to the address shown on the form.
Electronic bonds
By connecting into your TreasuryDirect account and setting up a direct payment to your bank or savings account, you can cash in your electronic bonds. Within two business days, the cash amount may be credited to your bank account.
Does Chase offer non-customers cash savings bonds?
According to Daniel Pederson, author of “Savings Bonds: When to Hold, When to Fold” and president of the Savings Bond Informer, only a few years have seen higher savings bond sales. Other notable years include 1992, when $17.6 billion in bonds were issued, 1993, when $13.3 billion was sold, and 2005, when $13.1 billion was sold.
Savings bonds were popular in 1986 because bonds purchased between January and October of that year had an introductory rate of 7.5 percent for the first ten years. Beginning in November 1986, the interest on newly purchased savings bonds was slated to drop to 6%.
In the last four days of October 1986, Pederson’s previous office at the Federal Reserve Bank branch in Detroit received more than 10,000 applications for savings bonds, according to Pederson. At that stage, the office would typically get roughly 50 applications for savings bond purchases every day.
“During the closing days of October 1986, bond buyers picked up billions of dollars in bonds. Most people were unaware that the 7.5 percent rate was only good for the first ten years of the bond “It’s my life,” he explained.
What’s the bond really worth?
The bond’s face value of $50 does not imply that it is worth $50. For a $50 Series EE bond in 1986, for example, you paid $25. So you’ve been accumulating enthusiasm for the $50 value and beyond.
The amount of money you get when you cash your bond depends on the bond and the interest rates that were paid during the bond’s tenure.
Calculate the value using the government’s Savings Bond calculator at www.treasurydirect.gov.
You’d enter a series of numbers from your savings bonds, and the government site would tell you how much the bond is worth right now, when the next interest payment is due, and when the bond will mature.
How much money could we be talking about here?
It’s also vital to remember that some people haven’t cashed other savings bonds from the early 1980s. As of Oct. 30, 2015, more than 7.2 million Series EE savings bonds issued in 1985 were still outstanding and had not been cashed. These bonds stop earning interest after 30 years.
In December, a $50 Series EE savings bond with a portrait of President George Washington, issued in January 1986, was worth $113.06. At the next payment in January 2016, the bond will earn a few more dollars in interest.
A $500 savings bond released in April 1986 with an image of Alexander Hamilton, a Founding Father and the nation’s first Treasury Secretary, was worth $1,130.60 in December. In April 2016, the next interest payment will be made.
Until their eventual maturity date, all bonds purchased in 1986 are currently earning 4%. As a result, you should keep track of when the bonds’ next interest payment is due.
For the first ten years, savings bonds purchased earlier in the year in 1986 paid 7.5 percent. For the first 12 years, the bonds purchased in November and December 1986 paid 6%. Following that, they both received 4%.
The bonds purchased in 1986 will reach their full maturity in a variety of months, depending on the issuance date. If you acquired a Series EE bond in February 1986, for example, the last payment of interest will be made on February 1, 2016.
Where can I cash the bond?
Non-customers can cash savings bonds at Chase and PNC Bank up to $1,000.
If you have a stack of 400 bonds, as some clients do, you should phone ahead to see if there is a good time to come in.
According to Joyce Harris, a spokesman for the federal Bureau of Fiscal Service, it’s a good idea to check with the bank first to see whether there’s a monetary limit on cashing a stack of bonds all at once. Advice: Do not sign the request for payment on the back of your bond until you have been instructed to do so by the financial institution.
Keep in mind that banks have varied policies about how much they would redeem in a single visit. Some financial institutions, such as banks and credit unions, will not redeem savings bonds at all.
What kind of taxes will I owe?
To begin, you must determine how much of the money you get is due to interest.
Many consumers are unaware that when they cash a U.S. savings bond, they do not pay taxes on the total amount received, according to George W. Smith IV, a certified public accountant and partner at George W. Smith in Southfield.
The amount you paid for the savings bond at the time of purchase, or the principal, is not taxed. Interest earned is taxed at ordinary income tax rates, not at capital gains tax rates.
So, if you cashed a $500 bond issued in April 1986 in December 2015, it would be worth $1,130.60. The bond was purchased for $250 by the buyer, whether it was Mom or Dad, Grandma, or you. In this situation, the interest of $880.60 would be taxable.
What if you cashed all of the 1986 bonds that came due in 2016? The bonds would then be taxed on your 2016 tax return.
It’s critical to account for interest and keep all of your papers while preparing your tax returns.
One elderly customer cashed in some savings bonds but didn’t aware she needed to record the interest income, according to Joseph DeGennaro, tax director for Doeren Mayhew in Troy. However, the Internal Revenue Service mailed her a tax bill with interest and a penalty for failing to declare the income a year later.
According to Pederson, some large savers are cashing in some of their 1986 bonds in 2015 and foregoing some interest to avoid having to pay all of the interest in 2016. He suggests seeing a tax specialist to see what options are best for you, and keep in mind that if you cash the bonds in 2015, you will miss out on the final one or two 4% interest rate payments that would have occurred in 2016.
TreasuryDirect.gov, the government’s website, also has information on who owes the tax and other tax-related questions.
It is feasible to track interest year after year as it grows. Most people, on the other hand, tend to put it off and declare the interest after the bond is cashed. Technically, even if you haven’t cashed the bond yet, you will owe taxes on interest in the year the bond stops earning interest and achieves full maturity, according to the savings bond website.
According to Pederson, the law is that interest received on a bond must be reported in the year it achieves ultimate maturity or when it is cashed, whichever comes first.
What’s the interest rate you’d get if you bought savings bonds online today?
A Series EE savings bond issued between November 2015 and April 2016 will now receive a fixed rate of 0.10 percent, making them less appealing.
For the first six months after the issuance date, a new Series I savings bond would earn a composite rate of 1.64 percent, with a portion of it indexing to inflation every six months. As a result, the interest rate on the Series I savings bond will change significantly over time.
For information on how to buy and sell bonds, go to www.treasurydirect.gov.
How can I cash a bond paper?
- Whether you have a local bank account and it accepts savings bonds, inquire if it will accept yours. The answer may be contingent on the length of time you’ve had an account there. If the bank will cash your check, find out if there is a monetary restriction on redemptions and what kind of identification and other documentation you’ll need.
- Send these, along with FS Form 1522, to Treasury Retail Securities Services (download or order). The bonds are not required to be signed. You’ll need to verify your identity. The instructions are on FS Form 1522, in the “Certification” section. Our address is also included in the form.
When cashing in savings bonds, how do I avoid paying taxes?
Cashing your EE or I bonds before maturity and using the money to pay for education is one strategy to avoid paying taxes on the bond interest. The interest will not be taxable if you follow these guidelines:
- The bonds must be redeemed to pay for tuition and fees for you, your spouse, or a dependent, such as a kid listed on your tax return, at an undergraduate, graduate, or vocational school. The bonds can also be used to purchase a computer for yourself, a spouse, or a dependent. Room and board costs aren’t eligible, and grandparents can’t use this tax advantage to aid someone who isn’t classified as a dependent, such as a granddaughter.
- The bond profits must be used to pay for educational expenses in the year when the bonds are redeemed.
- High-earners are not eligible. For joint filers with modified adjusted gross incomes of more than $124,800 (more than $83,200 for other taxpayers), the interest exclusion begins to phase out and ceases when modified AGI reaches $154,800 ($98,200 for other filers).
The amount of interest you can omit is lowered proportionally if the profits from all EE and I bonds cashed in during the year exceed the qualified education expenditures paid that year.
To cash a savings bond, what documentation do I need?
If you want to redeem a paper E/EE or I bond, you’ll need a few items. You’ll also need confirmation of identity, such as a driver’s license from the United States. You’ll also need an FS Form 1522 that hasn’t been signed. They’ll see you sign the document and then certify your signature if you go to your local bank or credit union.
The unsigned bonds, along with the signed FS Form 1522 and, if you’re the bond’s beneficiary, accompanying legal evidence or other papers to indicate you’re entitled to cash the bond, should be sent to the US Department of Treasury at:
The same steps apply for series H or HH paper bonds, only you’ll ship the unsigned bonds to the US Treasury at:
What is the value of a $100 savings bond?
You will be required to pay half of the bond’s face value. For example, a $100 bond will cost you $50. Once you have the bond, you may decide how long you want to keep it foranywhere from one to thirty years. You’ll have to wait until the bond matures to earn the full return of twice your initial investment (plus interest). While you can cash in a bond earlier, your return will be determined by the bond’s maturation schedule, which will increase over time.
The Treasury guarantees that Series EE savings bonds will achieve face value in 20 years, but Series I savings bonds have no such guarantee. Keep in mind that both attain their full potential value after 30 years.
Is it possible to cash savings bonds that are not in your name?
When it comes time to cash in your savings bonds, as long as you have the necessary documentation, the process will be relatively simple. It’s important to keep in mind that savings bonds cannot be sold, exchanged, or given away. The only person who can cash in the bond is the person whose name is on it (with a few exceptions, which we’ll discuss shortly).
First and first, you’ll need the bond (unless it’s an electronic bond, in which case there’s no step at all). The monies are deposited into your bank account once you cash it in via the Treasury Web site). However, make certain that the bond may be cashed: It’s been at least a year since it was published (some bonds only require a six-month retention period).
Is it possible to deposit paper bonds online?
Paper savings bonds, unlike bonds purchased online, cannot be redeemed using the Treasury Direct platform. You must instead take your paper certificates to a bank or other financial institution that processes Treasury Department redemptions.
To convert paper bonds to electronic bonds, you can use the Treasury Direct SmartExchange facility. The bonds can be redeemed online once they’ve been converted to electronic form. You must wait at least one year after purchasing the bonds before redeeming them as part of bond ownership. If you redeem them in fewer than five years, you will lose three months’ interest.
Is it possible to purchase a savings bond at Chase Bank?
Although the current 2.2 percent interest rate on Series I savings bonds is appealing, purchasing the bonds has grown more difficult. Paper Series I and EE savings bondsthose handy envelope stuffer giftscan no longer be purchased in banks or credit unions; instead, you must purchase electronic bonds through TreasuryDirect, the Treasury Department’s Web-based system. Our correspondent discovered the procedure of purchasing a savings bond for her little nephew to be cumbersome. Here’s some assistance: