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.
Is it possible for a bank to refuse to redeem a savings bond?
Bring your bond to your bank, but not any bank. It has to be an account that you’ve owned for at least six months. If that isn’t possible, you can use a government-issued photo ID to prove your identification. The most prevalent form of identification is a driver’s license. If you need identification like a driver’s license to prove your identity, you’ll only be able to cash $1,000 in savings bonds. After that, you’ll need to sign a payment request form in front of a bank representative, confirm your social security number, and validate your current address.
As long as the child is too young to sign his or her name, a parent or guardian of a child who is the holder of a savings bond can redeem the bond.
If the bond’s original owner has passed away but the bond’s beneficiary has been named, the beneficiary can redeem the bond. Finally, a person with legal capacity to conduct business on behalf of the bond bearer can redeem the bond in particular instances. This is usually someone acting on behalf of the estate of a deceased person.
A bank may refuse to issue payment for a bond in certain situations, or may even be legally unable to do so. In these instances, the bearer may be required to redeem the bond at a Federal Reserve Bank Savings Bond Processing Site. The Treasury Department’s TreasuryDirect Web site lists the locations of these facilities.
Do credit unions accept savings bonds as payment?
Your Series EE and Series I savings bonds can be cashed at most full-service banks and credit unions. They won’t be able to cash Series HH bonds, but they can forward them to a Federal Reserve bank that would. By completing the Direct Deposit Sign-Up Form (PDF 5396), which you can get here, you can have the funds deposited straight into your bank or savings account.
Before cashing in Series I and EE bonds purchased after February 1, 2003, they must be held for one year, as opposed to six months for bonds issued previously.
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.
Does Bank of America accept non-customer savings bonds?
Customers who have held a Citibank account for at least six months can redeem an unlimited quantity of Series E and EE savings bonds at Citibank branches. Bonds can be redeemed for up to $1,000 by non-customers and those who have been clients for less than six months.
Customers who have had a Bank of America account for at least six months can redeem an unlimited number of savings bonds, while non-customers and those who have had an account for less than six months can redeem up to $1,000 every day. Paper bonds will be redeemed by BB&T for customers who have been with the company for at least six months, as well as non-customers in specific instances. Find out what information you’ll need to bring to the bank branch, such as a driver’s license or other photo ID.
You can submit your savings bonds to Treasury Retail Securities Site, P.O. Box 214, Minneapolis, MN 55480-0214 if you can’t find a bank that will redeem them. You’ll need a certifying officer from a bank where you have an account to certify your signature on the reverse of each bond in the “request for payment” area. Your Social Security number will also be required. For additional information on redeeming savings bonds and particular rules if the bonds are not in your name, see the Treasury’s factsheet.
If you have electronic savings bonds, simply go to TreasuryDirect.gov and follow the instructions. Within two business days after the redemption date, the cash amount will be credited to your bank or savings account. See TreasuryDirect’s SmartExchange information page for details on converting paper savings bonds to electronic form.
Also, read Savings Bonds for College Tuition to see if you qualify for a tax advantage if you use savings bonds to pay for college tuition.
Are there any fees associated with cash savings bonds?
Banks are prohibited by federal law from charging consumers fees for cashing in savings bonds, though clients may be subject to fines if they cash the bond in too soon.
Will PNC Bank’s savings bonds be accepted?
As we begin a new year, we think about dieting, quitting bad habits, and finding inner peace.
But there’s one more thing to add to the list of financial priorities for 2016: US savings bonds.
Savings bonds were a massive issue in 1986, thanks to rising interest rates, and were almost as hot in some minds as Wall Street. Now, 30 years later, the new year will represent a watershed moment when millions of Series EE savings bonds purchased in 1986 will cease to pay interest at various points during 2016, depending on when the bond was issued. And those ties must be redeemed.
But here’s the catch: no one will notify you of this transaction or automatically redeem these bonds for you. It’s entirely up to you to decide.
Savings bonds, unfortunately, are one of those things that many of us have learned to disregard. Big money, on the other hand, could be lying in shoe boxes, safe deposit boxes, and other places among the savings bonds you used to find wrapped in birthday cards, bonds purchased through payroll deduction, or bonds inherited from Mom or Dad.
In 1986, almost $12 billion in savings bonds were purchased. A large number of the bonds have yet to be redeemed. According to the federal Bureau of the Fiscal Service, there were more than 12.5 million Series EE savings bonds with 1986 issue dates outstanding as of the end of October.
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.
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: