Matured U.S. Savings Bonds… now what?

Matured U.S. Savings Bonds… now what?

By Mark A. Vergenes | Photo by Will Marks 

I have matured U.S. savings bonds. Are they still earning interest and, if not, can I roll them over to another savings bond?

Once U.S savings bonds have reached maturity, they stop earning interest. Prior to 2004, you could convert your Series E or EE savings bonds to Series HH bonds. This would have allowed you to continue earning tax-deferred interest. However, after August 31, 2004, the government discontinued the exchange of any form of savings bonds for HH bonds, so that option is no longer available.

Since matured savings bonds no longer earn interest, there is no financial benefit to holding onto them. If you have paper bonds, you can cash them in at most financial However, it’s a good idea to call a specific institution before going there to be sure it will redeem your bonds. As an alternative, you can mail them to the Treasury Retail Securities Site (P.O. Box 214, Minneapolis, MN 55480) where they will be redeemed. If you have electronic bonds, log onto treasurydirect.gov and follow the directions there. The proceeds from your redeemed bonds can be deposited directly into your checking or savings account for a relatively quick turnover.

Another important reason to redeem your matured savings bonds may be that savings bond interest earnings, which can be deferred, are subject to federal income tax when the bond matures or is otherwise redeemed, whichever occurs first. So, if you haven’t previously reported savings bond interest earnings, you must do so when the bond matures, even if you don’t redeem the bonds.

Using the money for higher education may keep you from paying federal income tax on your savings bond interest. The savings bond education tax exclusion permits qualified taxpayers to exclude from their gross income all or part of the interest paid upon the redemption of eligible Series EE and I bonds issued after 1989 when the bond owner pays qualified higher education expenses at an eligible institution. However, there are very specific requirements that must be met in order to qualify, so consult your tax professional.