Savings bonds is a debt instrument that is issued by the US Government. The savings bonds were initially offered in 1941 to fund the US military operations in the Second World War. Since then it has been used to encourage people to save money. People can buy the savings bonds and when they redeemed it after a fixed period, they get back the money they spent with accrued interest. This is a good way for individuals to save money and for the Government to raise funds for its expenditure.

It is low-risk and since it is backed by the Government, your money is safe and there is no doubt that you will get back the money. The interested paid could be fixed or variable which changes as per market rates. You need not to pay tax on this money till you redeem it. So, if you have a savings bond, how do you redeem or cash it?

When to cash your saving bond?

A savings bond can be redeemed 12 months after the date of purchase. If you cash in the bond before five years, then you will lose three months of interest. The maturity period of a bond is up to 30 years. The longer you hold the bond, the more interest will you earn. You can redeem the bonds early if the area you live in has been affected by a disaster.

How to cash your saving bond?

Before you cash in, you can check the value of your bond online. Once you enter your bond details, you can find out how much it is worth as on date.

Savings bonds can be cashed at a bank or any other financial institution. If you have electronic bonds, you can cash it online at the TreasuryDirect website. If you go to the bank, where you have an account, you need not have to produce any identification proof; else you need to show proof of your identity. You would be paid cash for the bond value or the amount would be credited to your account.

If you have an electronic bond, you can enter all your details online, including details of the bond and your bank details. You can either redeem the bond for its entire value or you also have an option to redeem it partially of $25 or more. The bond will be redeemed instantly and the amount credited to your bank account. It may take one to two working days for the process to get completed and the money credited.

Tax implications

The income that you earn from your savings bond is taxable. While there are no state or local taxes, federal taxes are applicable. Make you collect the 1099-INT form from your bank. If you have redeemed the bond online, you can download the form from the TreasuryDirect website. It has details of all the interest you earn. You need to submit this form with your returns to the IRS. The income you have earned is taxable and you need to pay the tax applicable without fail.

A savings bond is a good way to save money in a risk-free option offered by the Government. You can cash the paper bond at a bank and electronic bond online.