How to cash in a bond depends on which type you own and where you bought it

The process is different for savings bonds (issued by the U.S. Treasury), corporate bonds (issued by companies), and municipal bonds (issued by states and cities). Savings bonds can only be redeemed through the Treasury or an authorized bank. Corporate and municipal bonds are usually sold on the secondary market through a broker rather than redeemed with the issuer. The timing, fees, and amount you receive all depend on which type you hold and when you want the cash.

Before you cash in any bond, check whether you'll face a penalty for early redemption, what the current market price is, and whether you owe taxes on the interest earned. These details change the actual amount you walk away with.

Key Takeaways

  • Savings bonds must be redeemed through TreasuryDirect.gov, a bank, or the Federal Reserve, and you cannot cash them in until at least one year after purchase.
  • Corporate and municipal bonds are sold to another investor through a broker, not returned to the issuer, and the price you receive depends on current market conditions.
  • Cashing in a bond before maturity may trigger an early redemption penalty, especially for savings bonds held less than five years.
  • You will owe federal income tax on the interest your bond earned, and state income tax may apply depending on the bond type and where you live.
  • The process takes one to three business days for savings bonds and two to five business days for bonds sold through a broker.

Cashing in a savings bond through TreasuryDirect

If you own a Series EE or Series I savings bond purchased after 2003, you can redeem it online through TreasuryDirect.gov using your login. Go to the "Manage Securities" section, select the bond you want to cash, and request redemption. The Treasury deposits the money into your linked bank account within one business day. You will receive the full face value plus all accrued interest, with no fees charged by the Treasury.

You can only redeem a savings bond online if you bought it through TreasuryDirect. If you received a paper savings bond or bought one through a bank before the online system existed, you cannot use this method. Paper bonds and older purchases require a different route.

Redeeming paper savings bonds at a bank or the Federal Reserve

Paper savings bonds must be cashed at a bank or the Federal Reserve. Call your bank first to confirm they redeem savings bonds — not all branches do. Bring the physical bond, a valid photo ID, and your Social Security number. The teller will verify the bond's authenticity, check that you meet the one-year holding requirement, and process the redemption. Most banks complete this same day or within one business day.

If your bank does not redeem savings bonds, contact the Federal Reserve Bank in your region. You can mail the bond to them with a completed Form PD 1522 (available on the Treasury website), along with a copy of your ID and Social Security card. Processing takes five to seven business days after they receive your package. The Federal Reserve will mail you a check or deposit the funds directly to your bank account if you provide account details.

Selling corporate or municipal bonds through a broker

Corporate and municipal bonds are not redeemed with the issuer — they are sold to another investor on the secondary bond market. You need a brokerage account to do this. If you already have one with a firm like Fidelity, Charles Schwab, or Vanguard, log in and place a sell order for the bond. The broker finds a buyer, executes the trade, and deposits the proceeds into your account within two to five business days.

If you do not have a brokerage account, you will need to open one before you can sell. This takes a few days and requires basic personal information and a bank account for deposits. Once your account is open, the actual sale process takes the same two to five business days. The price you receive depends on current market conditions — if interest rates have risen since you bought the bond, you may receive less than you paid. If rates have fallen, you may receive more.

Understanding the one-year holding requirement for savings bonds

You cannot redeem a Series EE or Series I savings bond until at least one year after purchase, no matter which method you use. If you try to redeem before that date, the Treasury will reject the request. This rule applies to all savings bonds, whether you bought them online, through a bank, or received them as a gift.

After one year, you can redeem at any time. However, if you redeem between one and five years after purchase, you lose the last three months of interest. For example, if you redeem a bond at 18 months, you only receive interest through month 15. After five years, there is no interest penalty for early redemption — you receive all accrued interest regardless of when you cash in.

Calculating what you will actually receive

The amount you receive when you cash in a bond is not the same as the purchase price or face value. For savings bonds, you get the full face value plus all accrued interest, minus any early redemption penalty. For corporate and municipal bonds, you get whatever the current market price is, which can be higher or lower than what you paid.

You will also owe federal income tax on the interest your bond earned. For savings bonds, you can choose to pay taxes when you redeem or report the interest on your tax return each year (most people wait until redemption). For corporate bonds, you owe federal tax on the interest. For municipal bonds issued by your state or city, the interest is usually exempt from federal tax, but you may owe state tax depending on where you live and where the bond was issued. Consult a tax professional if you are unsure about your tax liability.

What happens if you need the money before one year

If you own a savings bond and need cash before the one-year mark, you cannot redeem it. Your only option is to use the bond as collateral for a loan from a bank or credit union, though few institutions offer this. Most people in this situation simply wait until the one-year anniversary, even if it means delaying their cash need by a few months.

If you own a corporate or municipal bond and need cash before maturity, you can sell it on the secondary market at any time. The price will reflect current market conditions, which may be lower than what you paid if interest rates have risen. This is the trade-off for liquidity — you can access your money, but you may take a loss.

Frequently Asked Questions

Can I cash in a savings bond without the original paper if I bought it online?

Yes. If you purchased through TreasuryDirect, you have no physical bond to present. You redeem entirely online using your TreasuryDirect login. The system has your ownership record, so no paper is needed.

What if I lost my paper savings bond?

Contact the Treasury at 844-284-2676 or file a claim through TreasuryDirect. You will need to provide the bond's series, denomination, and issue date. The Treasury can issue a replacement, though the process takes several weeks. If the bond was lost or stolen, file a police report and include it with your claim.

Do I have to pay taxes when I redeem a savings bond?

You owe federal income tax on the interest, but not on the original amount you invested. You can pay the tax when you redeem or report it on your tax return. State tax depends on your state — some do not tax savings bond interest, while others do.

Why is the price different when I sell a corporate bond versus when I bought it?

Bond prices move in the opposite direction of interest rates. If rates have risen since you bought the bond, new bonds pay more interest, so your older bond is worth less. If rates have fallen, your bond is worth more. The secondary market price reflects this current value.

How long does it take to get my money after I sell a bond?

For savings bonds redeemed through TreasuryDirect, one business day. For paper bonds at a bank, usually the same day or next business day. For bonds sold through a broker, two to five business days. The variation depends on the broker's processing speed and your bank's deposit timing.