Savings bonds are popular gifts for young children, and grandparents often regard them as a good opportunity to invest in their grandchildren’s future. However, in some situations, parents will want to spend the earnings from savings bonds while their child is still a minor. In that instance, the parent must cash in the bond through US Treasury processes.
The Treasury distinguishes between paper savings bonds and electronic savings bonds. The Treasury permits parents to redeem their children’s paper bonds provided two conditions are met. To begin, the youngster must be too young to sign the payment request. Second, the child must either live with the parent or have legal possession of the child.
The Treasury recommends that you put particular language on the back of the bond and sign it as a parent on behalf of the child to redeem it. The following is the language used:
“I confirm that I am the parent of.resides with me / I have been given legal custody of.is years old and is incapable of making this request.”
If the parent takes the bond to a local financial institution ready to redeem it for him or her, the institution can pay the parent directly. If the bond is not redeemable at the local financial institution, the parent must have the signature guaranteed or attested before sending the bond to the Treasury Retail Securities Site. The Treasury website has more information.
What is the procedure for cashing in my child’s savings bonds?
Savings Notes, Series E, Series EE, and Series I can only be cashed at a financial institution or bank. If it’s a different form of bond, you’ll have to cash it at the Federal Reserve Bank.
When may a youngster cash in their savings bonds?
While anyone can buy a savings bond, because they have a 30-year maturity period, many individuals give them as gifts to children. You or your child can cash in a savings bond once it has been on the market for 12 months.
Is it possible for a parent to cash in their child’s savings bond?
Only if the child is too young to sign the savings bond on her own can a parent or guardian cash it. A parent who wishes to cash a child’s bond should generally take the youngster to the bank with him or her to show the bank officials that the bond owner isn’t old enough to sign for herself. A parent cannot cash in a savings bond without having the child sign it in the presence of a bank representative once the child is old enough and aware enough to put her own signature on it.
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 US 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.
When you cash in your savings bonds, do you have to pay taxes?
Taxes can be paid when the bond is cashed in, when the bond matures, or when the bond is relinquished to another owner. They could also pay the taxes annually as interest accumulates. 1 The majority of bond owners choose to postpone paying taxes until the bond is redeemed.
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 SSN required for a savings bond?
- Is it necessary to get my signature certified if I cash my bonds by mail using FS Form 1522?
- What should I do if I lose, steal, or destroy my paper savings bond?
- Is it necessary to repair a mistake, an erroneous address, or a wrong Social Security number on my paper EE bond?
- As a gift, I’d like to purchase a savings bond. What happens if I don’t have access to the owner’s Social Security number?
- I observed savings bonds were being auctioned on auction sites like eBayTM, but I assumed they were non-transferable. What is the mechanism behind this?
It is debatable. You can send us a copy of your driver’s license, passport, state ID, or military ID instead if the current redemption value of your bonds is $1,000 or less.
Fill out and sign FS Form 1048 (download or order) according to the directions on the form, then mail it to the address on the form.
- Serial number of Bond If you don’t have the bond serial number, please provide the following information:
If we can prove that a person who is entitled to cash the bonds hasn’t done so, we can replace them. Replacing or Reissuing a Lost or Destroyed Paper EE Bond is described in detail here.
Is it necessary for me to change a mistake, an erroneous address, or a wrong Social Security Number on my paper EE Bond?
- Misspelled Names EE bonds do not need to be reissued to fix minor spelling problems. If the error is substantial enough to preclude the bond owner from cashing it, the bond must be reprinted. Fill out and sign FS Form 4000 (download or order) as directed on the form, then mail it along with the bonds to the address listed on the form.
- Incorrect Address EE bonds do not need to be reissued if the address on the bonds is incorrect.
- Incorrect Social Security Number To correct a Social Security Number, EE bonds do not need to be reissued. The Social Security Number isn’t used to determine who owns something or who owes taxes. It’s utilized to track down savings bond records if the bonds go missing and the owner doesn’t keep track of the serial numbers. Keep track of all of your bonds, including serial numbers.
The first five digits of your Social Security number or Employer Identification number are masked and substituted with asterisks on any papersavings bonds issued on or after August 1, 2006. This was done to preserve your privacy and keep your information from being used to steal your identity.
When paying qualified higher education expenses, qualified taxpayers may be able to deduct all or part of the interest collected on eligible EE and I Bonds issued after 1989. At the time of issuance, bonds must be issued in the name of a taxpayer who is 24 years old or older. There are also some restrictions and income limits in place. See IRS Form 8815 for more information on the education tax credit.
If you cash a bond before it reaches the age of five years, you will lose the last three months’ interest. And you can’t cash a bond until it’s been on the market for a year.
Patriot Bonds are paper EE bonds with the words “Patriot Bond” imprinted on them.
They are no longer available for purchase.
To buy an electronic savings bond as a gift, you’ll need the recipient’s full name, Social Security number, and/or taxpayer ID number. The gift bond is kept in the account holder’s “Gift Box” until the account holder acquires the recipient’s TreasuryDirect account number and is ready to transfer the bond to his or her account.
Before you can give savings bonds as gifts, you must keep them in your TreasuryDirect account for at least five working days. Treasury is protected against loss by the five-day hold, which ensures that the ACH debit has been performed satisfactorily before the cash can be moved.
The bond will then be transferred and an e-mail will be sent to the gift recipient.
I spotted savings bonds for sale on auction sites like eBayTM, but I assumed ownership was not transferable. I’m not sure how this works.
Savings bonds are sometimes marketed as collectibles or souvenirs. Because a savings bond is a registered security and ownership is non-transferable, the sale has no effect on the savings bond’s ownership. The owner or co-owners stated on the bond, not the individual who bought the bond at auction, nonetheless have a contractual connection with the US Treasury. As a result, the person purchasing it at auction is unable to cash it; he has simply purchased a piece of paper indicating that the bond is still the property of the owner or co-owners specified on the bond. If the bond was lost and has since been replaced, it may be the property of the United States Treasury in some situations. Bottom line: Buying a savings bond at an auction is a bad idea because you don’t get any title or ownership rights to the bond.