United States Notes are a now-discontinued form of American paper currency issued directly by the U.S. Treasury, easiest to recognize by the red Treasury seal and red serial numbers on the face of the bill. Every one ever printed is still legal tender at face value, but because the government stopped putting new ones into circulation in 1971, most surviving examples are worth more to collectors than the number printed on them.
How to Tell If You Have One
Color is the fastest check. A United States Note carries a red Treasury seal on the right side of the face and red serial numbers. A modern Federal Reserve Note uses green for both. Look at the top of the face as well: a United States Note reads “United States Note” across the top, while a Federal Reserve Note reads “Federal Reserve Note” in that same position.
Seven denominations were produced over the series’ lifetime: $1, $2, $5, $10, $20, $50, and $100.1U.S. Currency Education Program. History of U.S. Currency The $2 and $5 red seals are the ones most people stumble across today, usually tucked into an old envelope or inherited with a parent’s papers.
Authenticity checks are the same as for any U.S. bill. Genuine currency paper is 75 percent cotton and 25 percent linen with tiny red and blue security fibers embedded through the sheet.2U.S. Currency Education Program. Dollars in Detail – Your Guide to U.S. Currency The surface should feel slightly rough from the intaglio printing. A bill that feels smooth or papery is suspect no matter what color the seal is.
What a United States Note Is Worth
Because new ones have not been printed in decades and the surviving pool shrinks every year as bills are lost or destroyed, most United States Notes trade above face value. How far above comes down to condition and series.
Condition does most of the work. A crisp, uncirculated $5 red seal from the 1960s can sell for several times face value, while a soft, heavily worn example from the same series may barely beat the $5 printed on it. Rarity matters next. The last denomination produced was the Series 1966 $100 United States Note, with only 768,000 printed, and surviving examples command significant premiums in any condition.
Star notes are the other thing to look for. These replacement notes carry a star symbol in place of the final letter of the serial number. The Bureau of Engraving and Printing uses them to replace defective sheets caught during quality control, which makes them considerably scarcer than standard notes and, depending on series and grade, worth many times face value.
Before you do anything else with a bill you suspect is unusual, get a second opinion from a reputable coin or currency dealer, or at least compare recent sold listings for the same series and grade. The spread between face value and collector value can be large, and the decision you make next depends on knowing which side of that spread you’re on.
Taxes If You Sell
If you sell a United States Note for a profit, the IRS treats the gain as a collectible capital gain rather than an ordinary investment gain. For notes you’ve held longer than a year, the maximum federal tax rate on the profit is 28 percent, versus the 20 percent ceiling on most other long-term capital gains.3Internal Revenue Service. Topic No. 409, Capital Gains and Losses Notes held a year or less are taxed as ordinary income. Factor that 28 percent rate into any decision about timing a sale, especially for a larger collection.
If the Note Is Damaged
A United States Note damaged by fire, water, chemicals, or deterioration can be submitted to the Bureau of Engraving and Printing for examination and potential redemption at face value. Federal regulations define “mutilated currency” as a note where half or less of the original remains, or whose condition is questionable enough to need expert review.4eCFR. 31 CFR 100.5 – Mutilated Paper Currency
The rules follow a sliding scale. A note with clearly more than half of its paper intact, and enough security features to verify, is redeemed at full face value. Fragments below the halfway mark are redeemed only if the BEP is satisfied that the missing portions were completely destroyed rather than simply separated. That judgment belongs to the BEP’s director and is final.
To file a claim, complete BEP Form 5283 on the Bureau’s website, print it, and mail it with the damaged currency to the Bureau of Engraving and Printing, 14th and C Streets SW, Washington, DC 20228.5Bureau of Engraving and Printing. How to Submit a Request for Mutilated Currency Examination Payment is made electronically now rather than by Treasury check, so you’ll need to provide bank account information on the form. Claims of $500 or more require banking details from a U.S. financial institution, and missing that information can delay things significantly.
One caution: the BEP redeems at face value only. If a damaged note might still carry collector value, weigh that against the face value you’d recover through redemption before mailing it in.
Depositing It at a Bank
Any bank will take a United States Note as a deposit at face value. The teller processes it as an ordinary cash transaction and credits your account for the dollar amount printed on the bill. Banks do not pay collector premiums. A $5 red seal that would bring $40 from a collector gets you $5 in your account.
Most banks pull older and unusual notes once they come across them and forward them to the Federal Reserve, which routes them to the Treasury for destruction. Depositing a United States Note is effectively a one-way trip for the bill. If there’s any chance it has collector value, check with a dealer before walking into the branch.
Legal Tender, and What That Does and Doesn’t Mean
Every United States Note ever printed is still legal tender. Under 31 U.S.C. § 5103, all United States coins and currency, including Federal Reserve Notes and circulating notes of national banks, are legal tender for all debts, public charges, taxes, and dues.6Office of the Law Revision Counsel. 31 USC 5103 – Legal Tender Congress has never demonetized United States Notes, and the Federal Reserve has confirmed that all U.S. currency remains legal tender regardless of when it was issued.7Federal Reserve. Do I Have to Trade in My Old-Design Notes When a New One Begins Circulating
Legal tender does not mean a store has to accept your bill. The Federal Reserve has stated that no federal statute requires a private business to accept currency or coins for goods or services.8Federal Reserve. Is It Legal for a Business in the United States to Refuse Cash as a Form of Payment A merchant can post a “no cash” policy or decline a bill it cannot verify. Where legal tender status does matter is in settling an existing debt: if you owe someone money and tender valid U.S. currency, a creditor who refuses it cannot later claim you failed to pay. The line between buying something and paying off a debt is where this often trips people up, and it’s the line the law draws.
Why They Exist and Why They Stopped
United States Notes came out of the Civil War. By early 1862 the costs of the war had drained federal reserves of gold and silver coin, and Congress passed the Legal Tender Act of February 25, 1862, authorizing the Treasury to issue paper notes that were not redeemable on demand for precious metal.9Architect of the Capitol. HR 240, Legal Tender Act, February 25, 1862 The public nicknamed them “greenbacks” for the green ink on the reverse, and they became the first true national paper currency in the United States.
They were a direct obligation of the Treasury rather than of the Federal Reserve System, and Congress capped how many could circulate at once, something that was never done with Federal Reserve Notes. In 1971 the Treasury stopped placing new United States Notes into circulation, since Federal Reserve Notes already handled every function the older notes served.10U.S. Currency Education Program. The History of American Currency – 1971 United States Notes Discontinued The ones already in people’s hands kept their legal tender status, which is why a red seal note that turns up in a desk drawer today is still spendable, and often worth considerably more than it was the day it was printed.