Florida Elder Law & Estate Planning Blog

The scoop on U.S. government savings bonds

Savings Bond

Do you have old paper U.S. savings bonds sitting around? Introduced in 1935, paper bonds were once the go-to gift for weddings, birthdays and other occasions.

There are three things you need to know about those old bonds to determine what they are worth and whether you should redeem them: the type of bond, the maturity date, and whether they have matured or are still gathering interest.

Three basic types of bonds

  • E bonds, and EE bonds issued more than 30 years ago, have matured and are no longer paying interest.
  • I Bonds: Those issued more than 30 years ago have matured.
  • H/HH: All H bonds, and HH bonds issued more than 30 years ago, have matured and are no longer paying interest.


Determine if the bond pays interest

To determine if your bond is still paying interest, go to the Treasury Department’s  Savings Bond Wizard.  If it is still earning interest, you can keep the bond until it matures, or, if you think you could get a better return elsewhere, cash it in and put the money into a different and presumably better investment. If you decide to cash in the bond, whether mature or not, the interest is subject to federal income tax. However, if you are going to college or graduate school, you may be able to avoid the tax consequences and use the interest from EE and I bonds to pay for your educational expenses. Read more about that here.

Not every bank will cash savings bonds, so call around first to find one that will. The Treasury Department website does not maintain a list, unfortunately.
Today, paper bonds are no longer issued. They can be purchased electronically only. If you don’t plan to redeem your paper bonds, it’s a good idea to convert them to electronic format using the Smart Exchange program.

Bonds inherited from someone who’s passed away

What about bonds that are inherited from a decedent, such as Series E bonds, which grow tax-deferred and therefore no income tax has been paid on the appreciation? (Unlike H bonds, which pay interest semi-annually). Since E Bonds are income tax-deferred, not tax-exempt, income tax must ultimately be paid. And unlike stocks with capital appreciation, there is no step-up in basis, which would provide income tax-free passage of the appreciation. The income tax can be paid as income with respect to the decedent (on the the decedent’s final income tax return), or may be paid by the beneficiary of the bond.

There are a numerous other rules that apply to purchasing, passing on and redeeming bonds. I suggest you check out TreasuryDirect.gov if you have additional questions: click here. (This link takes you to the section on EE bonds, but there are also clickable links for other types of bonds.)