How to Cash Your Savings Bonds

This article guides the reader through the use of bonds and the ways in which you can cash in those bonds and the reasons why this may be the best option.

Many people have purchased savings bonds through the years. It is possible that you have one or more, and that it has come to maturity. Or, you may have savings bonds and are in need of money. Cashing in your bonds could give you the money you need.

Many Savings Bonds Not Being Cashed

Every year, the Department of the Treasury receives about 25,000 returned checks for the value of its government bonds. When a bond matures at 30 years, the check for its value is automatically sent to the owner.

Savings bonds do not earn any interest after the 30-year mark. If your bonds are older than that, it is of little value to hold onto them in that form. The best thing you can do would be to cash them and then invest the money into some other kind of savings program that will earn interest.

Restrictions on Cashing Savings Bonds

If you have purchased bonds recently, such as the EE bonds, or the newer I bonds, you cannot cash them in under a year of their purchase. Other penalties will apply if you cash them within 5 years of their purchase date. This will be in the form of a penalty of the last three months of interest. After five years, there is no penalty.

Savings Bonds Can Be Cashed Locally

Some lenders can help you cash your bonds, if they are paper bonds. Probably the best place to cash them is to go to your financial institution where you have had an account for more than six months. Not every lender will cash bonds, but you will want to check your own bank first. You will need to have identification with you, and your name will have to be on the bond as the owner or co-owner. If the bond is not worth more than $1,000, the lender can cash it for you.

If the bond is worth more than $1,000, the bond may need to be sent to the government to cash. You will still need to go to your local financial institution that handles bonds and provide identification and your social security number to certify your signature; then sign the bonds. After they are signed and certified, they will need to be sent to the Treasury Retail Securities Site.Whenever a bond is cashed, a tax statement will always be issued. This will be a 1099-INT that will show all of the interest that has been earned by the bond. If desired, tax payments on interest can be paid yearly in order to not end up having to pay a large amount at one time.

Cashing a Bond for a Deceased Person

When a bond is owned by two people and one of them dies, then the bond belongs to the surviving owner. They are free to cash it as if they were the only one named on the bond. If both people that are named on the bond have died, then the bond goes to the beneficiary, or to the estate of the last one who died. An alternative to this is to have the bond reissued in the name of the survivor plus one other person. This can only be done if there is still time left on the bond to earn interest (less than 30 years old). Save on Interest Taxes After Cashing Bonds

One way to save on taxes owed for the interest a bond has earned is to use the money for educational purposes. The government will allow a tax exemption on money that is used at qualified schools, and for courses that are required for a degree. All or some of it may be used. There are some restrictions, though, such as you must be 24 or older when the bond is purchased, and the money must be used to pay for tuition and fees; costs for room and board, and books do not qualify. Your name, or our spouse's name, must be on the bond. Only bonds in the EE and I series qualify, and there are income limitations, as well. In order to use them later for a child, the child must be named on the bond as a beneficiary.

Cashing Electronic Bonds

Cashing in your electronic bonds can also be done after a year at TreasuryDirect.gov. In fact, you cannot cash them anywhere else. After you have purchased a bond through this website, you can also keep track of how much the bond has earned. When you cash these government bonds, the money will be automatically deposited into your bank account. Many people have savings bonds floating around that they could benefit from if they cashed them in. You cannot cash other people's bonds without proper authorization. If you are not sure that an EE/E bond has been cashed in or not, you can contact the Bureau of the Fiscal Service in Parkersburg , West Virginia.

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