The best time to cash in savings bonds is after you’ve held them at least five years, on or just after the first day of a month, and ideally in a year when your income is lower than usual. Series EE and Series I bonds keep earning interest for 30 years, so redeeming too early costs you a three-month interest penalty, and redeeming too late means your money sits idle. Between those bookends, a handful of dates on the calendar can move the payout by a meaningful amount.
Wait Past the Five-Year Mark If You Can
You cannot cash a Series EE or Series I bond at all during the first 12 months after purchase.1TreasuryDirect. Cashing EE or I Savings Bonds After that, you can redeem anytime, but cashing before the five-year anniversary of the issue date forfeits the last three months of interest.2eCFR. 31 CFR 359.7 – If I Redeem a Series I Savings Bonds Before Five Years After the Issue Date, Is There an Interest Penalty Cash a bond at 18 months and you receive only 15 months of interest.3TreasuryDirect. I Bonds
Once you cross the five-year mark, the penalty disappears and you receive full accumulated value. If you’re a few months short and don’t urgently need the cash, waiting almost always pays.
Cash On or Just After the First of the Month
Interest on Series I bonds accrues on the first day of each month, and Series EE bonds follow the same monthly pattern.4eCFR. 31 CFR 359.16 – When Does Interest Accrue on Series I Savings Bonds The interest a bond earns during a month gets credited at the start of the following month.
So if you redeem on the last day of a month, you walk away without the interest that would have posted the very next day. One extra day of waiting captures a full month of earnings. Check your bond’s issue date on the paper certificate or in your TreasuryDirect account and plan the redemption for on or shortly after the first.
Don’t Cash a Series EE Bond Right Before Year 20
The Treasury guarantees that any Series EE bond bought at face value will double in value at 20 years. If the bond’s fixed interest rate alone wouldn’t get it there, the Treasury adds a one-time adjustment at the 20-year mark to make up the difference.5TreasuryDirect. EE Bonds
Many older EE bonds carry low fixed rates, so that adjustment can be substantial. Cashing an EE bond a few months before its 20-year anniversary can mean leaving a large one-time bump on the table. After the doubling adjustment, the bond continues earning its fixed rate for the remaining 10 years to final maturity.
Don’t Hold Past 30 Years
Every Series EE and Series I bond earns interest for 30 years from its issue date. At that point the bond hits final maturity and stops earning entirely. Holding it longer doesn’t reduce its value, but the money sits idle while inflation erodes what it can buy.
If you still hold any Series HH bonds, those reached final maturity 20 years from issue and the last of them stopped paying interest by August 2024.6eCFR. 31 CFR Part 352 – Offering of United States Savings Bonds, Series HH Any HH bonds in a drawer should be redeemed now.
Time Redemption to a Lower-Tax Year
Savings bond interest is subject to federal income tax but exempt from state and local income tax.7TreasuryDirect. Tax Information for EE and I Bonds You owe tax only on the interest, not on what you originally paid.
Most bondholders defer reporting interest until they actually receive it, either by cashing the bond or when it reaches final maturity. Under that approach, a single Form 1099-INT covers all the interest the bond earned over its entire life, and it shows up in the year you redeem.7TreasuryDirect. Tax Information for EE and I Bonds The savings bond interest appears in Box 3 of that form.8Internal Revenue Service. Form 1099-INT Interest Income
Because the tax rate depends on your federal bracket in the redemption year, timing matters. Cashing in a year when you’re between jobs, retired, or otherwise earning less means the interest gets taxed at a lower rate. Total taxable interest over $1,500 for the year requires Schedule B with your return.9Internal Revenue Service – IRS.gov. Savings Bonds 1
You can also elect to report interest every year as it accrues instead of deferring. That spreads out the tax hit if you hold many bonds. Switching back to deferring later requires following IRS procedures for changing your reporting method.10eCFR. Appendix to 31 CFR Part 351 – Tax Considerations
The Maturity Tax Trap
If a bond reaches final maturity and you don’t cash it, you still owe federal income tax on all the accumulated interest in the year it matures. The Treasury treats the bond as though it paid you out. For electronic bonds, it moves the funds into a Certificate of Indebtedness in your TreasuryDirect account; for paper bonds, a 1099-INT is issued at maturity.7TreasuryDirect. Tax Information for EE and I Bonds Either way, the full lifetime of interest lands on a single return, and it can push you into a higher bracket. If you hold bonds approaching year 30, plan the redemption year deliberately rather than letting maturity choose it for you.
Cash in a Tuition Year to Use the Education Exclusion
You may be able to exclude savings bond interest from federal taxable income if you use the proceeds to pay qualified higher education expenses (tuition and fees for yourself, your spouse, or a dependent) in the same year you redeem the bond.11Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees This is the Education Savings Bond Program, and matching redemption year to a tuition year is the whole trick.
To qualify:
- The bond must have been issued after December 31, 1989.
- You must have been at least 24 years old when the bond was issued.
- You cannot file as married filing separately.
- For tax year 2026, the exclusion begins to phase out at a modified adjusted gross income of $101,800 for single filers and $152,650 for joint filers, and disappears entirely at $116,800 and $182,650 respectively.12Internal Revenue Service. Internal Revenue Bulletin 2025-45
If redemption proceeds exceed your qualified education expenses for the year, only a proportional share of the interest is excludable. Redeem $10,000 in bonds against $7,000 in qualifying tuition and fees, and 70% of the interest is excludable.11Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees
Check the Current Value Before You Cash
Look up what the bond is actually worth before redeeming, so the timing decision is based on real numbers. For paper bonds, the series (EE, I, or E) is in the upper right corner, the issue date is on the right side below the series, and the serial number is in the lower right corner.13TreasuryDirect. Savings Bond Calculator – Detailed Instructions Enter the series, denomination, and issue date into the Savings Bond Calculator on TreasuryDirect to see the current value and when the next interest posting is due.14TreasuryDirect. Savings Bond Calculator For electronic bonds, the value is visible in your TreasuryDirect account.
One boundary worth noting: paper bonds must be cashed in full and can’t be partially redeemed. Electronic bonds allow partial redemption of any amount of $25 or more, provided you leave at least $25 in the bond, and you only receive interest on the portion you cash.1TreasuryDirect. Cashing EE or I Savings Bonds So if you want to cash some now and let the rest keep growing, that option only exists for electronic bonds.