- 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.
You’ve Stopped Earning Interest
If a savings bond has stopped collecting interest, it’s a no-brainer to cash it in. Cashing in your savings bond early may be an option to explore depending on your current financial circumstances.
Before cashing in your savings bond, it’s always a good idea to do some research. Bonds can be paid in for their current value as early as the one-year mark. If you cash out before the five-year period has passed, you’ll lose three months’ worth of interest.
Cashing Out vs Creating Debt
If you’re in desperate need of money right now, Redeeming a savings bond is better than taking on debt, according to Yusuf Abugideiri, partner and senior financial planner at Yeske Buie, a financial consulting firm with offices in San Francisco and Washington, D.C.
“While you will be charged a price for early redemption of your savings bond, it is a one-time payment,” explains Abugideiri, compared to the recurring cost of interest on a credit card or personal loan.
Calculating Bond Value
The current value of a paper savings bond can be calculated using the Treasury’s online calculator. It should tell you how much the bond is worth today, how much you paid for it when you first bought it, how much interest you’ve earned so far, and how much money you’d get if you sold it right now. To check the value of your electronic bonds, go to TreasuryDirect.gov.
Is it possible to cash out a bond before it matures?
You can redeem your bond at any time before it matures, as long as it has been at least a year since you purchased it. Your bond must have been in place for at least 12 months. It cannot be redeemed in any other way.
When is the best time to cash in savings bonds?
In about 30 years, most savings bonds stop earning interest (or achieve maturity). A savings bond can be redeemed as soon as one year after purchase, but it’s normally best to wait at least five years so you don’t miss out on the last three months of interest. If you redeem a bond after 24 months, for example, you will only receive 21 months of interest. It’s usually better to wait until your bond reaches full maturity, depending on the interest rate and your individual financial demands.
Is there a penalty for not cashing in savings bonds that have reached maturity?
Your link has finally matured after three decades of waiting. If you wish to cash in your bonds, you must follow specific requirements depending on the type of bond you have (paper or electronic).
- You can cash electronic savings bonds on the TreasuryDirect website, and you’ll get your money in two days.
- Most major financial institutions, such as your local bank, accept paper savings bonds.
If you can’t find your fully matured paper savings bond, you can have it electronically replaced by going to the TreasuryDirect website and filling out the necessary papers.
You’ll need the serial number of the bond, which serves as a unique identity. If this isn’t accessible, you’ll need other information, such as the exact month and year the bond was purchased, the owner’s Social Security number, and the names and addresses of the bond’s owners. Even if you’ve misplaced the bond, it’s possible to find it with a few efforts.
You can keep your bond after it matures, but you will not get any extra interest. On the one hand, because you can’t spend a savings bond without redeeming it, the value of your bonds is considered “secure.” On the other side, if your bond isn’t redeemed, you’ll miss out on additional sources of interest. With current inflation rates, it doesn’t make much sense to hold a bond that pays nothing and is losing money to inflation every day.
Finally, regardless of whether you redeem your bonds or not, you will owe taxes on them when they mature. In the year of maturity, make sure to include all earned and previously unreported interest on your tax return. If you don’t, you may be subject to a tax penalty for underpayment.
When I cash in my savings bonds, will I receive a 1099?
On January of the following year, 1099-INTs are posted in TreasuryDirect. Use the ManageDirect page’s URL.
If you cash at a bank, the paperwork is provided. The bank may give you the form right away or mail it to you later, maybe after the year in which you cash the bond has ended.
If you cash with Treasury Retail Securities Services, the form will be mailed to you in January of the following year.
What happens if I cash a savings bond before the maturity date?
- You would lose the last three months of interest if you cash an EE bond before it reaches the age of five years.
- If you don’t redeem your EE bonds before they mature, you’ll get 30 years of interest. As a result, the longer you keep the bond (up to 30 years), the more valuable it becomes.
Is it possible to pay in a 30-year bond early?
Savings bonds are a relatively “secure” investment, but reaping the full advantages takes a long time. If you hold the bonds for 20 years, you can expect to double your money, but they can collect interest for up to 30 years. It is possible to cash out early, but you will forfeit some of the benefits.
After 30 years, how much is a $50 EE savings bond worth?
Savings bonds are regarded as one of the most secure investments available. The underlying principle is that the value of a savings bond grows over time, but it’s easy to lose track of how much it’s worth over time.
The TreasuryDirect savings bond calculator, fortunately, makes determining the value of a purchased savings bond a breeze. You’ll need the bond series, face value, serial number, and issuance date to figure out how much your savings bond is worth.
If you bought a $50 Series EE bond in May 2000, for example, you would have paid $25. At maturity, the government committed to repay the face amount plus interest, bringing the total value to $53.08 by May 2020. A $50 bond purchased for $25 30 years ago is now worth $103.68.
Is there a penalty for early redemption of savings bonds?
If you cash in Series I or EE savings bonds fewer than five years after purchase, you will be charged an early redemption penalty of three months interest. You will receive your original investment plus any interest earned up to three months prior to the redemption date. When you redeem savings bonds, the Treasury Department does not levy any fees. There is no penalty for early redemption after the five-year mark has passed.