When should I cash in EE savings bonds?
You can cash in (redeem) your EE bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.
If you want full value, you should hold the Series EE bonds at least until maturity, and if you want extra, you can hold them until 30 years. But once 30 years have passed, it's a good idea to cash them in because you won't get any extra benefit.
If you still have a paper EE bond, check the issue date. If that date is more than 30 years ago, it is no longer increasing in value and you may want to cash it.
All Series EE bonds reach final maturity 30 years from issue. Series EE savings bonds purchased from May 1995 through April 1997 increase in value every six months.
If you hold savings bonds and redeem them with interest earned, that interest is subject to federal income tax and possibly federal gift taxes (highly unlikely as the per-person cap is $10,000 and the gift tax exemption is $17,000).
Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
---|---|---|
$50 Bond | $100 | $207.36 |
$100 Bond | $200 | $414.72 |
$500 Bond | $400 | $1,036.80 |
$1,000 Bond | $800 | $2,073.60 |
You can report the interest each year you earn it or when you cash the bond. You will report it on Schedule B of your 1040. You can avoid these taxes by using the money for qualified higher education expenses.
While the Treasury will not penalize you for holding a U.S. Savings Bond past its date of maturity, the Internal Revenue Service will. Interest accumulated over the life of a U.S. Savings Bond must be reported on your 1040 form for the tax year in which you redeem the bond or it reaches final maturity.
Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.
Where do I cash in a savings bond? You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.
How do I cash in mature EE bonds?
You may be able to cash in paper EE bonds at a bank where you have an account or through TreasuryDirect. Ask your bank about its process for cashing savings bonds. Ask your bank how much it will cash at one time. Determine the identification or other documents you will need.
In a less-risky investment such as bonds, which have averaged a return of about 5% to 6% over the same period, you could expect to double your money in about 12 years (72 divided by 6).
When Do Savings Bonds Mature? U.S. Savings Bonds mature after 20 or 30 years, depending on the type of bond: Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity.
The interest on EE bonds isn't taxed as it accrues unless the owner elects to have it taxed annually. If an election is made, all previously accrued but untaxed interest is also reported in the election year. In most cases, this election isn't made so bond holders receive the benefits of tax deferral.
At a bank: If a bank cashes your savings bond, they are responsible for getting you a 1099-INT. They may give or mail you the 1099-INT as soon as you cash the bond or they may wait until the following January.
In addition to the bonds, you'll need to provide proof of identity, like a United States driver's license, and partner with a notary to notarize and certify your signature on an unsigned FS Form 1522 to your local bank or credit union.
Total Price | Total Value | Total Interest |
---|---|---|
$50.00 | $69.94 | $19.94 |
There are two primary reasons a bond might be worth less than its listed face value. A savings bond, for example, is sold at a discount to its face value and steadily appreciates in price as the bond approaches its maturity date. Upon maturity, the bond is redeemed for the full face value.
After 20 years, the Patriot Bond is guaranteed to be worth at least face value. So a $50 Patriot Bond, which was bought for $25, will be worth at least $50 after 20 years. It can continue to accrue interest for as many as 10 more years after that.
Key Takeaways. Interest from EE U.S. savings bonds is taxed at the federal level but not at the state or local levels for income. The interest that savings bonds earn is the amount that a bond can be redeemed for above its face value or original purchase price.
Why should you wait to cash out your savings bond?
Most bonds can be cashed in after one year, but you will lose three months' worth of interest if you cash them in before five years.
The only option for cashing electronic savings bonds is by logging in to your TreasuryDirect account online. If you have paper savings bonds, you can fill out the appropriate form and mail it and the bonds you want to cash to the Treasury Retail Securities Services — the address is listed on FS Form 1522.
Savings bond interest is subject to federal income tax; however, taxation can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first. You also have the option of claiming interest annually for federal income tax purposes.
Banks and credit unions can redeem savings bonds over the counter. Find out more about becoming an agent and redeeming savings bonds.
Using the money for higher education may keep you from paying federal income tax on your savings bond interest.
References
- https://www.vtcpa.com/insights-perspective/how-series-ee-savings-bonds-are-taxed
- https://www.investopedia.com/ask/answers/111314/how-are-savings-bonds-taxed.asp
- https://www.citizensbank.com/learning/how-to-cash-savings-bonds.aspx
- https://fergusonfinancialinc.com/financial-planning/us-savings-bond-tax-trap/
- https://www.fool.com/investing/how-to-invest/bonds/patriot-bonds/
- https://www.treasurydirect.gov/forms/sec0050.pdf
- https://www.treasurydirect.gov/savings-bonds/ee-bonds/1980-through-1995/
- https://treasurydirect.gov/savings-bonds/cashing-a-bond/financial-institutions/
- https://www.cnn.com/cnn-underscored/money/how-to-cash-a-savings-bond
- https://www.investopedia.com/ask/answers/111714/how-long-will-it-take-bond-reach-its-face-value.asp
- https://www.investopedia.com/ask/answers/013015/why-my-bond-worth-less-face-value.asp
- https://time.com/personal-finance/article/savings-bonds-guide/
- https://www.nerdwallet.com/article/banking/ask-a-nerd-how-do-i-cash-a-savings-bond
- https://www.bankrate.com/banking/savings/when-to-cash-in-series-ee-savings-bonds/
- https://www.usatoday.com/money/blueprint/investing/how-to-cash-ee-bonds/
- https://smartasset.com/taxes/how-can-i-avoid-paying-taxes-on-savings-bonds
- https://www.treasurydirect.gov/savings-bonds/tax-information-ee-i-bonds/
- https://www.treasurydirect.gov/BC/SBCPrice?Denomination=50&DenominationList=&InterestList=&InterestRateList=&IssueDate=12/2000&IssueDateList=&IssuePriceList=&MaturityDateList=&NextAccrualDateList=&NoteList=&OldRedemptionDate=782&RedemptionDate=6/2006&SerialNumList=&SerialNumber=&Series=I&SeriesList=&ValueList=&Version=6&ViewPos=0&ViewType=Partial&YTDInterestList=&btnAdd.x=CALCULATE
- https://www.investopedia.com/financial-edge/0711/how-to-double-your-money-every-6-years.aspx
- https://www.treasurydirect.gov/savings-bonds/cashing-a-bond/
- https://www.irs.gov/refunds/using-your-income-tax-refund-to-save-by-buying-us-savings-bonds
- https://www.investopedia.com/articles/personal-finance/060614/time-cash-your-us-savings-bonds.asp
- https://www.americasfavoriteea.com/post/how-to-avoid-paying-taxes-on-u-s-savings-bonds
- https://www.treasurydirect.gov/savings-bonds/ee-bonds/