What is the penalty for cashing in I bond?

Cashing in an I Bond before 5 years results in a penalty of the last 3 months of interest earned, but you must wait at least 12 months from the issue date to cash it at all; after 5 years, there's no penalty, though the interest rate resets every six months based on inflation, so timing your redemption (around the 5-year mark or after the rate reset) can maximize returns.

What is the penalty for cashing i-bonds early?

The I Bond early withdrawal penalty is forfeiting the last three months of interest if you cash it in before holding it for five years; you must wait at least one year to redeem, but after five years, there's no penalty at all. For example, if redeemed after 18 months, you get 15 months of interest; if redeemed after 6 years, you get 100% of your interest and principal.
 

Do you pay taxes on i-bonds when you cash them out?

Taxes when you are the bond owner

They can pay federal income tax each year on the interest earned or defer the tax bill to the end. Most people choose the latter. They report the interest income on their Form 1040 for the year the bonds mature (generally, 30 years) or when they're cashed in, whichever comes first.

When can an I bond be redeemed without penalty?

You can sell I-Bonds without penalty after holding them for at least five years, as this avoids the early withdrawal penalty of losing the last three months of interest, though you cannot redeem them at all in the first 12 months. If selling before five years, you'll forfeit the last three months of interest, so strategically selling just after your bond's interest rate resets (which happens every six months after purchase) minimizes the actual interest lost, say CNBC, notes. 

What is the best time to cash out an I bond?

Best time to redeem: To maximize your interest earnings, consider redeeming on the first business day of the month. I Bonds accrue interest for the previous month on this day, and you won't be penalized for missing out on a full month of interest as you would if you redeem at month's end.

Cashing in Series EE Savings Bonds: Maximizing Value and Avoiding Penalties

How do I cash my i-bonds?

To redeem I-Bonds, log in to your TreasuryDirect account (TD), navigate to ManageDirect, select Redeem securities, choose Series I bonds, then select the bond(s) to cash and follow prompts to choose a full or partial amount and deposit to your bank account, remembering that redeeming before 5 years costs the last 3 months' interest. 

How much is a $100 bond worth after 30 years?

A $100 U.S. Savings Bond (Series EE) purchased in October 1994 would be worth approximately $164.12 after 30 years, as these bonds stop earning interest at their 30-year final maturity, but you can find the exact value for any bond using the U.S. Treasury's Savings Bond Calculator by entering its series, denomination, and issue date. 

How can I cash a bond without paying taxes?

You can cash U.S. Series EE or I savings bonds without paying federal income tax on the interest if you use the funds for qualified higher education expenses for yourself, your spouse, or a dependent, provided you meet income and age requirements (owner must be 24+) and file as 'Married Filing Jointly' or Single, not 'Married Filing Separately'. Alternatively, you can roll the proceeds into a 529 plan, or defer taxes until maturity, but using for education offers the best tax avoidance. 

What is the downside of an I bond?

Cons: Rates are variable, a lockup period and early withdrawal penalty apply, and there's a limit to how much you can invest. Availability: I bonds can be purchased only through taxable accounts, not in IRAs or 401(k)s.

What is the interest rate for I bonds in November 2025?

For I Bonds purchased in November 2025 through April 2026, the new composite rate is 4.03%, which includes a permanent fixed rate of 0.90% and an inflation rate of 3.12%, applying for the first six months. This rate, announced by TreasuryDirect on November 1, 2025, represents a drop in the fixed rate from the prior period but offers strong inflation protection. 

Will I get a 1099 for cashing in savings bonds?

If you cash a paper savings bond at a local bank, that bank is responsible for giving you a 1099. If you cash a paper savings bond by mailing it to Treasury Retail Securities Services, we mail you a 1099 by January 31 of the following year. (You can call us for a duplicate statement, if needed, beginning February 15.)

Do I have to pay tax if I cash in a bond?

Cashing in a bond in any part or making withdrawals may create a chargeable event, which is a measure of the growth that may be taxable. To calculate the chargeable gain: Add the surrender value and the value of any tax-deferred withdrawals. Subtract the amount you originally invested.

Does it matter whose social security number is on a savings bond?

The individual owns the U.S. Savings Bond if only their name appears on it. The Social Security Number shown on a bond is not proof of ownership. EXAMPLE: A U.S. Savings Bond title reads, “John Smith.” Only John Smith can cash that bond.

How much do you lose if you cash in a bond early?

You can cash in (redeem) your I 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.

What are the fees for using TreasuryDirect?

TreasuryDirect is free. There are no fees, no matter how much or how little you invest. You may hold both savings bonds and Treasury marketable securities in TreasuryDirect.

What day of the month do I-Bonds pay interest?

§ 359.16 When does interest accrue on Series I savings bonds? (a) Interest, if any, accrues on the first day of each month; that is, we add the interest earned on a bond during any given month to its value at the beginning of the following month.

How do I cash out my I bond?

To redeem I-Bonds, log in to your TreasuryDirect account (TD), navigate to ManageDirect, select Redeem securities, choose Series I bonds, then select the bond(s) to cash and follow prompts to choose a full or partial amount and deposit to your bank account, remembering that redeeming before 5 years costs the last 3 months' interest. 

Why does Dave Ramsey not invest in bonds?

For starters, I don't buy bonds. Bonds are frequently pitched in the financial world as being much safer than the stock market, but actual data shows they're not that much safer. The bond market, in general, is almost as volatile as the stock market because of the way bond values respond to shifting interest rates.

Is it worth keeping I bonds?

I Bonds offer a secure way to protect savings from inflation while earning a modest return. They may be particularly appealing to those seeking safety and government backing, as well as tax advantages. However, purchase limits, early withdrawal penalties and a long maturity period may make them less attractive to some.

Do I need to report I bonds on my tax return?

I cashed some Series E, Series EE, and Series I savings bonds. How do I report the interest? In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.

When can you sell I bonds without penalty?

You can sell I-Bonds without penalty after holding them for at least five years, as this avoids the early withdrawal penalty of losing the last three months of interest, though you cannot redeem them at all in the first 12 months. If selling before five years, you'll forfeit the last three months of interest, so strategically selling just after your bond's interest rate resets (which happens every six months after purchase) minimizes the actual interest lost, say CNBC, notes. 

How much is a 30 year old $100 savings bond worth today?

A $100 savings bond's value after 30 years depends on the issue date, but for a Series EE bond from October 1994, it's worth about $164.12, having earned $114.12 in interest, as these bonds stop earning interest after 30 years. You can find the exact value using the TreasuryDirect Savings Bond Calculator by entering the bond's series, denomination, and issue date. 

Why is my $100 savings bond only worth $50?

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.

What's the best time to cash savings bonds?

Most savings bonds stop earning interest (or reach maturity) between 20 to 30 years. It's possible to redeem a savings bond as soon as one year after it's purchased, but it's usually wise to wait at least five years so you don't lose the last three months of interest when you cash it in.

What happens to savings bonds if the owner dies?

When a savings bond owner dies, the bond either goes directly to a named surviving co-owner or beneficiary, bypassing probate, or it becomes part of the deceased's estate if no one else is listed, passing through a will or state law. If it's an estate asset, it's handled by an executor (or court-appointed representative) and distributed according to the will or intestacy laws, potentially requiring forms like FS Form 5394 for smaller estates or court involvement for larger ones.