When a bond matures, the issuer returns the bond’s full face value to whoever holds it and sends one last interest payment covering the period since the previous coupon. That is what happens when a bond matures in the mechanical sense: principal comes back, a final coupon lands, the bond stops existing in your account, and any gap between what you paid and what you received becomes a taxable event. For a bond held in a normal brokerage account, the whole thing usually happens without you lifting a finger.
You Get the Face Value Back
The maturity date is the day the issuer must return the bond’s principal, called par value. For most bonds that is $1,000 per bond. You receive that amount regardless of what you originally paid. Buy a $1,000 bond at a $950 discount and you still collect $1,000 at maturity. Pay $1,050 at a premium and you still collect $1,000. The issuer’s obligation is the face amount printed on the bond, not whatever price the bond traded at in the secondary market.
Federal tax law treats amounts received when a debt instrument is retired as amounts received in exchange for the bond.1Office of the Law Revision Counsel. 26 U.S. Code 1271 – Treatment of Amounts Received on Retirement of Debt Instruments That framing is what triggers the capital gain or loss calculation covered below.
One Last Interest Payment, Then the Income Stops
Alongside your principal, you receive a final coupon covering the days from the previous payment date through the maturity date. After that, the bond stops accruing interest entirely. The amount follows the coupon rate written into the bond’s terms. A bond with a 5 percent annual coupon paying semiannually delivers a final payment equal to half a year of interest on the face value.
Small differences in how brokers calculate that last payment come from the day-count convention the bond uses. Corporate bonds commonly treat every month as 30 days and every year as 360. Treasury bonds typically count actual days in each month and year. Your brokerage handles this automatically, but knowing which convention applies is the place to start if a final statement looks off by a few dollars.
How the Money Actually Reaches You
Most bonds today exist in book-entry form, meaning digital records rather than paper certificates. On the maturity date the brokerage coordinates with the issuer’s paying agent, the principal and final coupon post to your cash account, and the bond drops off your holdings screen.2FINRA. Understanding Settlement Cycles – What Does T+1 Mean for You
Treasury marketable securities held directly in TreasuryDirect are even simpler. If you haven’t scheduled the proceeds to roll into a new security, the Treasury pays you automatically on the maturity date and sends the money to your linked bank account or Certificate of Indebtedness.3TreasuryDirect. Redeeming Treasury Marketable Securities
If you still hold a paper certificate, you surrender it to the designated paying agent, usually a commercial bank or trust company. The agent verifies the certificate before releasing funds by check or wire. Paper redemptions are increasingly rare but the process still works.
Taxes When a Bond Matures
The IRS treats a bond reaching maturity as a sale or exchange, so you may owe capital gains tax on the difference between your adjusted cost basis and the amount you receive.1Office of the Law Revision Counsel. 26 U.S. Code 1271 – Treatment of Amounts Received on Retirement of Debt Instruments Buy at par and mature at par, and there is no gain or loss on the principal. Buy at a discount and the gap between what you paid and the face value is generally taxable.
Interest payments you collected across the bond’s life are taxed as ordinary income in the year you received them, and the final coupon works the same way. For a bond purchased at a premium, you may have been amortizing that premium over the life of the bond, gradually reducing your cost basis toward par. If you made the amortization election, your basis at maturity should equal face value, leaving no capital gain or loss on the principal.4Internal Revenue Service. Publication 550 – Investment Income and Expenses
What Your Brokerage Reports
Your brokerage files Form 1099-B reporting the maturity as a disposition. Proceeds go in Box 1d, cost basis in Box 1e, along with acquisition and disposition dates. The final coupon interest gets reported separately on Form 1099-INT, not folded into the principal proceeds.5Internal Revenue Service. Instructions for Form 1099-B If your own records don’t match what the brokerage reports, resolve the difference before filing. IRS computers match 1099 forms to returns, and mismatches generate notices.
Zero-Coupon Bonds Pay Everything at the End
Zero-coupon bonds skip periodic interest entirely. You buy at a deep discount and collect the full face value at maturity. A zero-coupon bond bought for $700 that matures at $1,000 gives you a $300 return in a single lump sum, with no cash along the way.
The tax treatment is different from what you might expect. Even though no cash arrives until maturity, the IRS requires you to report imputed interest each year as the bond’s value climbs toward par. That phantom income is taxed annually as ordinary income, so by the time the bond matures you have already paid tax on most of the built-in gain.4Internal Revenue Service. Publication 550 – Investment Income and Expenses This is why zero-coupon bonds are often held inside tax-advantaged accounts like IRAs, where the annual imputed interest doesn’t produce a current tax bill.
Savings Bonds Stop Earning at 30 Years
If the bond in question is a U.S. savings bond, the maturity rules are different from marketable Treasury or corporate bonds, and this is where people most often leave money sitting idle. Both Series EE and Series I savings bonds reach final maturity 30 years after their issue date and stop earning interest completely at that point.6eCFR. Title 31 Part 351 Subpart B – Maturities, Redemption Values, and Investment Yields of Series EE Savings Bonds A Series EE bond issued in 1996 stopped earning interest in 2026. A Series I bond earns interest until you cash it or it turns 30.7TreasuryDirect. I Bonds Interest Rates Once that 30-year mark passes, sitting on the bond just loses purchasing power to inflation.
To redeem electronic savings bonds, log in to TreasuryDirect, select the bond, and request full or partial redemption. Proceeds go to your linked bank account.8TreasuryDirect. Redeem Savings Bonds Paper savings bonds can be cashed at most banks or mailed to the Treasury. If you have lost track of old bonds, your state’s unclaimed property program now handles inquiries about unredeemed or matured savings securities; the Treasury retired its Treasury Hunt lookup tool in September 2025 under the SECURE Act 2.0.9TreasuryDirect. Treasury Hunt
When a Bond Gets Called Before Maturity
Not every bond makes it to its stated maturity date. Many corporate and municipal bonds include a call provision that lets the issuer pay off the debt early.10Investor.gov. Callable or Redeemable Bonds Issuers typically exercise this option when interest rates drop, because they can retire your higher-rate bond and reissue new debt at a lower cost.
When an issuer calls a bond, you receive the face value plus any accrued interest, and sometimes a call premium on top. A traditional call uses a premium schedule written into the bond’s terms. A make-whole call calculates the premium as the present value of the future coupons you would have received had the bond run to maturity, discounted at a spread over a comparable Treasury rate. Either way, your income stream ends earlier than planned, and the proceeds have to be reinvested at whatever rates exist at that moment.
Reinvestment Risk on the Proceeds
Getting your money back is the easy part. Deciding what to do with it is harder. If rates have fallen since you bought the original bond, every new bond you look at will pay less than the one that just matured. That’s reinvestment risk, and it’s why experienced bond investors rarely put all their money into a single maturity date.
A bond ladder spreads holdings across several staggered maturities so only a portion of the portfolio comes due in any given year. When the shortest bond pays off, you roll those proceeds into a new long-term bond at the far end of the ladder. The approach doesn’t eliminate reinvestment risk, but it keeps you from putting a large lump sum to work at the worst possible moment, and it produces regular cash without forcing you to sell bonds early at unfavorable prices.