Cash them in at a bank or the Treasury, but timing matters for the interest you've earned

When you need money from a savings bond, you have two main routes: take it to a bank that redeems bonds, or cash it directly through the U.S. Department of the Treasury. A bank is faster if you already have an account there — most process redemptions the same day. The Treasury route takes longer but works if your bank won't redeem, and you can do it by mail or through TreasuryDirect, the online platform where many bonds are now held.

The catch is timing. Series EE and I bonds have a penalty if you cash them before five years have passed: you lose the last three months of interest. So a bond you bought two years ago will cost you money to redeem early. After five years, there is no penalty, and you keep all interest earned. Series HH bonds (older bonds, rarely issued now) have different rules and should be checked individually with the Treasury.

Before you cash anything, check how long you've held it. If you're close to the five-year mark, waiting a few months might be worth more than the cash you need right now.

Key Takeaways

  • Redeeming a Series EE or I bond before five years costs you the last three months of interest, so check the purchase date before you cash it in.
  • Banks that hold your account can redeem most bonds the same day; the Treasury can redeem any bond but takes longer.
  • You'll need the bond itself (physical or digital access through TreasuryDirect) and a form of ID to prove ownership.
  • Interest from redeemed bonds counts as income on your federal tax return for the year you cash them, unless you used them for education expenses under specific rules.

Redeeming at a bank versus the Treasury

If you have a checking or savings account at a bank, call ahead and ask whether they redeem savings bonds. Most large banks do, and the process is simple: bring the bond (or log into TreasuryDirect if it's digital), show your ID, and they'll deposit the money into your account. This usually happens the same business day. Smaller banks or credit unions may not redeem bonds, so confirm before you go.

If your bank won't redeem or you don't have a bank account, contact the Treasury directly. You can mail the bond and a completed form (FS Form 1522 for Series EE or I bonds) to the Bureau of the Fiscal Service in Parkersburg, West Virginia. Processing takes about four weeks. Alternatively, if the bond is in TreasuryDirect, you can redeem it online instantly, and the money goes to the bank account linked to your TreasuryDirect account within one to three business days.

Digital bonds held in TreasuryDirect are the fastest route overall because there's no physical mail or bank visit involved. Physical bonds require you to have the actual certificate or access to the serial number and other identifying information.

What happens to the interest when you redeem

The interest you've earned on a savings bond is added to the redemption value you receive. If you've held the bond for five years or longer, you get the full amount. If you redeem early, the Treasury subtracts three months of interest as a penalty.

That interest counts as taxable income in the year you redeem the bond. The Treasury will send you a Form 1099-INT showing how much interest you received, and you'll report it on your federal tax return. You may owe federal income tax on it, and depending on your state, you may owe state income tax as well.

There is one exception: if you used the bond to pay for may have access to education expenses (tuition and fees at an accredited school or university) in the same year you redeemed it, you may be able to exclude the interest from your taxable income. This requires filing Form 8815 with your tax return and meeting specific income limits. Not all bonds may have access to — only Series EE bonds issued after 1989 and Series I bonds may have access to for this treatment.

Replacing a lost or destroyed bond

If you've lost a physical bond or it's been damaged, you can request a replacement from the Treasury. You'll need to file Form FS 1048 and provide as much information as you can about the bond: the series, denomination, issue date, and serial number if you have it. The Treasury will search their records to confirm the bond exists and issue a replacement.

This process takes several weeks and requires you to certify that the bond is lost or destroyed. If the bond has already matured (stopped earning interest), the Treasury may simply issue you a check for the final value instead of replacing the certificate.

Digital bonds in TreasuryDirect cannot be lost in the same way because they exist only in your online account. If you lose access to your account, you can recover it by verifying your identity through the login process.

Transferring bonds instead of cashing them

You don't always have to redeem a bond. You can transfer ownership to someone else — a child, spouse, or anyone else — without cashing it in. This is useful if you want to give a bond as a gift or pass it to an heir. The new owner can then hold it, let it continue earning interest, or redeem it whenever they choose.

For physical bonds, you'll need to sign the back and have the new owner sign as well, then submit the bond to the Treasury with a completed form. For digital bonds in TreasuryDirect, you can transfer them through your account settings. The transfer is free and doesn't trigger any tax consequences for you — the interest earned becomes the new owner's income when they eventually redeem it.

What to do if you need money before five years

If you're facing a financial emergency and your bond hasn't reached the five-year mark, redeeming it will cost you three months of interest. Calculate whether that penalty is worth the cash you need. For example, if a $10,000 Series I bond has earned $500 in interest over two years, the penalty is roughly $125 (three months of that $500). If you need the money, that may be a cost you accept.

Before you redeem, consider whether you have other savings you could use instead — a regular savings account, a money market account, or a credit card you could pay off later. Those options preserve your bond's full value. If the bond is your only option, redeem it, but understand that you're giving up some of the interest you've earned.

Some people hold bonds specifically for emergencies because they're safer than stocks and earn more than a savings account. If that's your situation, try to keep enough in a liquid savings account for immediate needs so you don't have to touch bonds before five years.

Reporting redeemed bonds on your taxes

When you redeem a savings bond, the Treasury sends you a Form 1099-INT in January of the following year showing the interest you earned. You report this on your federal tax return as interest income. If you redeemed multiple bonds, you may receive multiple 1099-INT forms, or they may be combined into one.

Keep the 1099-INT with your tax records. If you're filing electronically, your tax software will prompt you to enter the interest income. If you're filing by hand, you'll report it on Schedule B (Interest and Ordinary Dividends) and then transfer the total to your Form 1040.

State income tax rules vary. Some states tax savings bond interest, and some don't. Check your state's tax website or ask a tax preparer if you're unsure whether you owe state tax on the interest.

Frequently Asked Questions

Can I redeem a savings bond at any bank?

Most large banks redeem savings bonds for account holders, but not all banks do. Call your bank first to confirm. If they won't redeem, you can mail the bond to the Treasury or redeem it online through TreasuryDirect if it's a digital bond.

What if I don't know how long I've held the bond?

The issue date is printed on the bond certificate. Count forward five years from that date. If you have a digital bond in TreasuryDirect, log in and the issue date will be listed in your account. You can also call the Treasury at 844-284-2676 to confirm the date.

Do I have to pay taxes on the interest right away?

No. You report the interest on your tax return for the year you redeem the bond. The Treasury sends you a 1099-INT form in January, and you have until the tax filing deadline (usually April 15) to report it. You may owe taxes then, depending on your total income and tax bracket.

What if the bond is in someone else's name?

Only the person whose name is on the bond can redeem it without a court order. If the bond owner has died, the heir will need to provide a death certificate and may need to go through probate or a simplified process depending on the bond's value and state law. Contact the Treasury for guidance on your specific situation.

Can I redeem a bond partially, or do I have to cash the whole thing?

You must redeem the entire bond. You cannot cash in half of a $10,000 bond and keep the other half earning interest. If you need only part of the value, you'll have to redeem it all and then reinvest the portion you don't need in a new bond or another savings vehicle.