How to cash out savings bonds
You can cash out a savings bond at most banks and credit unions, or directly through the U.S. Department of the Treasury. The method depends on whether you own paper bonds or electronic bonds held in TreasuryDirect. Paper bonds go to a financial institution; electronic bonds are redeemed online. You must wait until the bond has reached final maturity or you will lose accrued interest — for Series EE bonds, that is 30 years from issue date. Some bonds can be cashed before maturity, but you will forfeit the last three months of interest.
The process itself is straightforward once you know which type of bond you hold and where it is stored. The harder part is understanding the tax consequences: the interest you earned is taxable income in the year you redeem, and you may owe federal tax, state tax, or both depending on where you live.
Key Takeaways
- Paper savings bonds can be cashed at banks, credit unions, and some other financial institutions; electronic bonds are redeemed through your TreasuryDirect account online.
- Series EE and Series I bonds reach final maturity at 30 years, and cashing them before that point costs you the last three months of accrued interest.
- The interest earned on savings bonds is subject to federal income tax in the year you redeem them, and may also be subject to state and local tax.
- You will need the bond certificate or your TreasuryDirect login to redeem, plus a government-issued ID and proof of Social Security number at a financial institution.
Cashing paper bonds at a bank or credit union
If you own physical paper bonds, take them to a bank or credit union where you have an account. Most institutions will cash them for you on the spot, though some may require you to be a customer. Bring the bond certificate itself, a government-issued photo ID (driver's license, passport, or state ID), and proof of your Social Security number — a Social Security card, tax return, or W-2 will work.
The teller will verify the bond's serial number and issue date, confirm you are the registered owner, and check whether the bond has reached a point where it can be cashed. If the bond is still in its penalty period (the first year for most bonds), the institution may refuse to cash it. If it is past the penalty period but before final maturity, you will receive the current redemption value, which includes accrued interest minus the three-month penalty.
The bank deposits the money into your account or gives you a check. You will receive a receipt showing the redemption amount. Keep this receipt — you will need it when you file your taxes to report the interest income.
Redeeming electronic bonds through TreasuryDirect
Electronic bonds held in a TreasuryDirect account are redeemed entirely online. Log into your account at treasurydirect.gov, navigate to the "Manage My Securities" section, and select the bond you want to redeem. The system will show you the current redemption value and confirm whether the bond is may be able to access for redemption.
Once you request redemption, the Treasury transfers the money to the bank account you have on file with TreasuryDirect within two business days. You do not need to provide ID or proof of ownership — your login credentials serve as verification. The Treasury sends you a confirmation email with the redemption amount and the date the funds will arrive.
Like paper bonds, the interest portion of your redemption is taxable in the year you cash out. TreasuryDirect does not withhold taxes automatically, so you are responsible for reporting the income when you file.
What happens if you cash a bond before it matures
Most savings bonds can be cashed after one year, but doing so before the bond reaches final maturity costs you money. The Treasury withholds the last three months of accrued interest as a penalty. For a Series EE bond that reaches final maturity in 30 years, cashing it at year 20 means you lose three months of interest that would have accumulated between year 20 and the end of year 20.
Some bonds, like Series I bonds, have different rules. Series I bonds cannot be cashed in the first year at all. If you redeem one between year one and year five, you lose the last three months of interest. After five years, you can redeem without the penalty.
The redemption value you receive is the principal plus all accrued interest up to the redemption date, minus the three-month penalty (if applicable). This amount is what appears on your receipt and what the Treasury deposits into your account.
Understanding the tax treatment of redeemed bonds
The interest you earned on a savings bond is subject to federal income tax. You report it on your federal tax return in the year you redeem the bond, using the redemption amount minus the original purchase price as your taxable interest income. If you bought a $50 Series EE bond for $25 and redeemed it for $48, your taxable interest is $23.
Most states do not tax savings bond interest, but a few do. Check your state's tax rules or consult a tax professional if you live in a state with income tax. You may also owe local tax depending on your city or county.
The Treasury does not withhold federal income tax from your redemption, so you will not see a reduction in the amount you receive. This means you need to set aside money for taxes if you expect to owe, or plan to pay the tax when you file your return.
Finding lost or misplaced bonds
If you own paper bonds but cannot locate them, contact the Treasury's Bureau of the Fiscal Service at 844-284-2676 or visit treasurydirect.gov. You will need to provide the bond's serial number, issue date, and denomination if you have them. If you do not have this information, the Treasury can search its records using your name and Social Security number.
If a bond was lost or destroyed, the Treasury can issue a replacement. The process takes several weeks and requires you to file a claim with supporting documentation. Once the replacement arrives, you can redeem it the same way you would a regular bond.
For electronic bonds in TreasuryDirect, you cannot lose them — they exist only in your online account. If you forget your login credentials, you can reset your password through the TreasuryDirect website using your email address and Social Security number.
What to do with the money after redemption
Once you receive the redemption proceeds, the money is yours to use however you choose. Some people deposit it into a savings account, others use it for expenses, and some reinvest it in new bonds or other securities. There are no restrictions on how you spend the money after redemption — the only requirement is that you report the interest income on your taxes.
If you want to continue building savings through Treasury securities, you can purchase new Series EE or Series I bonds through TreasuryDirect, or buy Treasury bills, notes, and bonds through the same platform. Each has different maturity dates and interest rates, so compare them if you are considering reinvestment.
Frequently Asked Questions
Can I cash a savings bond if I am not the registered owner?
No. Only the person whose name appears on the bond can redeem it. If the bond is registered to a deceased person, the executor of their estate can redeem it, but you will need to provide a death certificate and proof of your authority to act on behalf of the estate.
What if my bank refuses to cash my savings bond?
Some smaller banks and credit unions do not cash savings bonds. If your bank declines, try another financial institution in your area, or redeem the bond directly through TreasuryDirect if it is electronic. For paper bonds, you can also mail them to the Treasury's Bureau of the Fiscal Service with a completed form, though this takes longer.
Do I have to report the interest when I redeem, or can I wait until I file my taxes?
You must report the interest in the year you redeem the bond, not in future years. The IRS considers the interest income earned in that tax year, regardless of when you actually spend the money. If you redeem in December, you report it on that year's tax return, even if you do not file until April.
What is the difference between the redemption value and what I actually receive?
The redemption value is the amount the Treasury calculates you are owed, including principal and accrued interest minus any penalty. That is the amount deposited into your account or given to you as a check. There is no difference — what you see on your receipt is what you get.
Can I redeem a bond partially, or do I have to cash the whole thing?
You must redeem the entire bond. You cannot cash out half of a $100 bond and keep the other half earning interest. If you need only part of the money, you will have to redeem the full bond and reinvest the portion you do not need in a new bond.