The best time to cash in savings bonds is after you have held them at least five years (to avoid the three-month interest penalty), on or just after the first day of a month (to capture the newly credited interest), in a tax year when your other income is lower than usual — and never past the 30-year final maturity date, when the bond stops earning anything. For Series EE bonds issued since May 2005, there is one more line to watch: the 20-year mark, when the Treasury’s doubling guarantee kicks in.
The 30-Year Hard Stop
Both Series EE and Series I savings bonds earn interest for exactly 30 years from the issue date, then stop. Series I bonds reach that point through an original 20-year maturity plus a 10-year extension.1eCFR. 31 CFR Part 359 – Offering of United States Savings Bonds, Series I
Once a bond crosses that line, every additional day of holding is a day inflation eats purchasing power with no interest to offset it. The tax bill does not wait either. For electronic bonds, the Treasury moves the proceeds into a Certificate of Indebtedness in your TreasuryDirect account at maturity and issues a 1099-INT for that year, so the deferred interest becomes taxable whether you redeem or not.2U.S. Department of the Treasury TreasuryDirect. Tax Information for EE and I Bonds
If you own older Series E bonds, issued between 1941 and 1980, they reached final maturity long ago. Cash them now.
The First Year and the Five-Year Penalty
You cannot redeem any savings bond during the first 12 months after purchase. After that, the bond is cashable at any time, but redeeming before five full years costs you the most recent three months of interest.3U.S. Department of the Treasury TreasuryDirect. Cash EE or I Savings Bonds Cash an I bond after 18 months and you receive 15 months of interest.4TreasuryDirect. I Bonds
Hold past five years and the penalty disappears completely. Every cent of earned interest stays yours. If you can reasonably wait, waiting pays.
One narrow exception to the one-year lockup: a federal disaster declaration in your area. If your county has an active declaration, you can redeem bonds less than a year old by calling the Treasury at 844-284-2676 or sending a certified FS Form 5512 with “DISASTER” written on the envelope and the form.5TreasuryDirect. Affected by a Disaster
The 20-Year Mark for Series EE Bonds
Series EE bonds issued from May 2005 onward carry a guarantee that the Treasury does not extend to any other savings bond: after 20 years, the bond will be worth at least twice what you paid. If the fixed rate alone has not gotten it there, the Treasury makes a one-time adjustment to double the value.6TreasuryDirect. EE Bonds Issued May 2005 and Later That doubling works out to about 3.5% annualized, well above the 2.50% fixed rate on EE bonds issued between November 2025 and April 2026.7TreasuryDirect. EE Bonds
Cashing a modern EE bond at year 19 forfeits the single most valuable moment in the bond’s life. After the doubling adjustment, the bond keeps earning its lower fixed rate for another decade. At that point, you can run the math against other options and decide whether holding or redeeming makes more sense.
Picking the Right Day of the Month
Interest on both EE and I bonds is credited on the first day of each month.8eCFR. 31 CFR Part 351 Subpart B – Maturities, Redemption Values, and Investment Yields of Series EE Savings Bonds Cash a bond on October 31 and you get exactly the same amount as cashing on October 2. Wait one more day, until November 1, and a full extra month of interest lands in your account.
The rule is simple: redeem on or just after the first of the month, never in the last days of the previous month. Interest compounds semiannually, so the exact months when a bigger jump occurs depend on your issue date. To see the current value and next accrual date for a paper bond, the Treasury offers a free calculator at treasurydirect.gov/savings-bonds/savings-bond-calculator; electronic bond values appear in your TreasuryDirect account.9TreasuryDirect. Paper Savings Bond Calculator
Timing I Bonds Around Rate Resets
Series I bonds pay a composite rate built from a fixed rate (locked in for the life of the bond) and a variable inflation rate that resets every six months. The Treasury announces new inflation rates on May 1 and November 1 each year, but the rate on your specific bond resets every six months counted from your issue month, not on those announcement dates.10TreasuryDirect. I Bonds Interest Rates
When inflation runs hot, hold through the high-rate six-month window rather than cashing in the middle of it. When a reset drops your composite rate close to zero, that six-month stretch is a reasonable time to exit if you have a better place for the money. If your bond was issued in March, its rate changes each March and September; check your issue month to find your personal reset dates.
Choosing the Right Tax Year
Savings bond interest is subject to federal income tax but exempt from state and local income tax, and it is taxed as ordinary income rather than at capital gains rates.11Internal Revenue Service. Topic No. 403, Interest Received Most owners defer reporting the interest until they cash the bond or it reaches final maturity, whichever comes first.2U.S. Department of the Treasury TreasuryDirect. Tax Information for EE and I Bonds
That default is convenient, but it means decades of interest hit a single tax return. A big enough redemption can push you into a higher bracket. The usual moves to avoid that:
- Cash bonds in a year when your other income drops — the year you retire, take a sabbatical, or spend time between jobs.
- Spread redemptions of multiple bonds across two or more tax years so no single year takes the full hit.
You can also elect to report interest each year as it accrues instead of deferring. Making that switch requires reporting all previously accrued interest in the switch year, and you must then use the annual method for every EE and I bond you own.12Internal Revenue Service. Publication 550, Investment Income and Expenses Switching back to deferral later requires IRS permission through Form 3115.
The Education Exclusion
If you use redemption proceeds to pay qualified higher education expenses (tuition and fees at an eligible postsecondary institution) for yourself, your spouse, or a dependent, you can exclude the bond interest from federal income tax entirely.13Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees All of the following must be true:
- The bond was issued after December 31, 1989.
- You were at least 24 years old before the bond’s issue date.14TreasuryDirect. Using Bonds for Higher Education
- You do not file as married filing separately.
- Your modified adjusted gross income falls under the phase-out. For 2026, the exclusion phases out starting at $101,800 for single filers ($152,650 for married filing jointly) and ends at $116,800 ($182,650 joint).
- You cash the bonds and pay the qualifying expenses in the same tax year.
If your redemption exceeds your qualified expenses, you can exclude only the share of interest that matches the expenses. The exclusion is claimed on IRS Form 8815, filed with your return.15Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
How to Redeem Once You’ve Picked the Moment
Electronic bonds are redeemed inside TreasuryDirect. Log in, go to ManageDirect, and choose “Redeem securities” under Manage My Securities. The money typically lands in your linked bank account within two business days.3U.S. Department of the Treasury TreasuryDirect. Cash EE or I Savings Bonds
Paper bonds can be cashed at many banks and credit unions with a valid government-issued photo ID. Some institutions cap how much they will redeem in one visit, especially for non-customers, so call ahead for larger amounts. If no local bank will handle them, mail the paper bonds with FS Form 1522 (signature certified by a notary, bank officer, or other authorized officer) to Treasury Retail Securities Services, P.O. Box 9150, Minneapolis, MN 55480-9150.16Department of the Treasury. Special Form of Request for Payment of United States Savings and Retirement Securities Mailed redemptions take several weeks, so build that lag into your month-end timing.