Guide to Selling U.S. Savings Bonds (I Bonds)

Quick answer

• You can redeem I Bonds electronically through TreasuryDirect.gov.
• I Bonds must be held for at least one year before redemption.
• If redeemed within five years, you forfeit the last three months of interest.
• You can redeem I Bonds held for over a year without penalty, but the interest earned in the last three months will be lost if redeemed within five years.
• If an I Bond is inherited, special rules apply regarding holding periods and redemption.
• Electronic I Bonds are generally easier to sell than paper savings bonds.

Who this is for

• Individuals who own U.S. Series I Savings Bonds and need access to their funds.
• Investors who have held I Bonds for at least one year and are considering redemption.
• Heirs who have inherited I Bonds and need to understand the selling process.

What to check first (before you act)

Goal and timeline

Before you decide to sell your I Bonds, clarify why you need the money and when you need it. Are you funding a short-term goal, like a down payment in six months, or a long-term goal, like retirement in 20 years? This will help determine if selling now is the right financial move, considering potential penalties or lost interest.

Current cash flow

Assess your overall financial situation. Do you have sufficient income and savings to cover your expenses without needing to tap into your I Bond investments? If your regular cash flow is tight, you might need to redeem your bonds sooner, potentially incurring penalties.

Emergency fund or safety buffer

Ensure you have a healthy emergency fund in place, typically covering 3-6 months of living expenses. If you’re dipping into your I Bonds because you lack an emergency fund, prioritize rebuilding it after redemption to avoid future financial distress.

Debt and interest rates

Compare the interest rate you’re earning on your I Bonds with the interest rates on any debts you hold. If you have high-interest debt (like credit cards), it might be financially wiser to pay off that debt rather than redeem low-interest savings bonds. Check the official source or your provider for current I Bond rates.

Credit impact

Selling I Bonds generally does not directly impact your credit score. However, if you redeem them to pay off debts, a responsible repayment strategy can positively influence your credit over time. Conversely, if you redeem them to cover unexpected expenses due to a lack of preparedness, it could indirectly lead to financial strain that might affect your credit.

Step-by-step (simple workflow)

Step 1: Determine if you meet the holding period requirement

What to do: Check the issue date of your I Bonds.
What “good” looks like: Your I Bonds have been held for at least one year.
A common mistake and how to avoid it: Forgetting the one-year minimum. Avoid this by noting the issue date when you purchase the bonds or by checking your TreasuryDirect account.

Step 2: Access your TreasuryDirect account

What to do: Log in to your TreasuryDirect.gov account. If you don’t have an account and purchased paper bonds, you’ll need to follow a different process (see below).
What “good” looks like: You can successfully log in to your account.
A common mistake and how to avoid it: Forgetting your login credentials. Securely store your username and password, and utilize the account recovery options if needed.

Step 3: Navigate to the “Redeem Savings Bonds” section

What to do: Within your TreasuryDirect account, find the option to redeem savings bonds.
What “good” looks like: You’ve located the correct redemption link or button.
A common mistake and how to avoid it: Getting lost in the website interface. Take your time to read the navigation labels carefully.

Step 4: Select the I Bonds you wish to redeem

What to do: Choose the specific I Bonds from your account that you want to sell.
What “good” looks like: The correct bonds are highlighted or selected for redemption.
A common mistake and how to avoid it: Accidentally selecting the wrong bond. Double-check the bond’s serial number or denomination before proceeding.

Step 5: Specify the redemption amount

What to do: Enter the amount you wish to redeem. You can redeem the full bond or a portion of it.
What “good” looks like: The amount entered is accurate and within the available balance.
A common mistake and how to avoid it: Entering an incorrect amount. Be precise and confirm the value before submitting.

Step 6: Review the redemption details and potential interest loss

What to do: Carefully review the summary of your redemption request. Pay close attention to the estimated interest you will receive, especially if redeeming within five years.
What “good” looks like: You understand the net amount you will receive and any interest forfeited.
A common mistake and how to avoid it: Not realizing the penalty for early redemption. The system will usually show you the estimated interest, but be aware that if you redeem before five years, you lose the last three months of interest.

Step 7: Confirm the redemption

What to do: Authorize the redemption by confirming your request.
What “good” looks like: Your redemption request is successfully submitted.
A common mistake and how to avoid it: Rushing the final confirmation. Take one last look at all the details before clicking “submit.”

Step 8: Receive your funds

What to do: Funds will typically be deposited into your linked bank account.
What “good” looks like: The money appears in your bank account within a few business days.
A common mistake and how to avoid it: Not having a linked bank account or having incorrect bank details. Ensure your bank account information is up-to-date in TreasuryDirect.

Step 9: Handling paper savings bonds (if applicable)

What to do: If you have paper I Bonds, you will need to fill out Treasury Form PD 1045 and have it signed and witnessed by a bank official or notary public. Mail the form to the address provided on the form.
What “good” looks like: The form is completed correctly and submitted via certified mail.
A common mistake and how to avoid it: Not getting the form properly notarized or witnessed. Ensure all signatures and seals are present as required.

Step 10: Consider tax implications

What to do: Understand how the interest earned is taxed. Interest on I Bonds is subject to federal income tax but is exempt from state and local income taxes.
What “good” looks like: You are aware of the tax treatment and can report it correctly on your tax return.
A common mistake and how to avoid it: Assuming I Bonds are tax-free. Remember to report the interest income to the IRS.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Redeeming before one year	You cannot redeem the bond.	Wait until the bond has been held for at least one full year.
Redeeming between one and five years	Forfeiture of the last three months of interest.	Understand the interest penalty. If the lost interest is significant, consider waiting until the five-year mark.
Forgetting to update bank account details	Delays or failure in receiving redemption funds.	Regularly check and update your linked bank account information in TreasuryDirect.
Not understanding the tax implications	Unexpected tax liability or failure to claim available deductions.	Familiarize yourself with federal tax rules for I Bonds and consult a tax professional if unsure.
Mishandling paper savings bonds	Delayed redemption, lost bonds, or invalid redemption requests.	Follow the instructions on Treasury Form PD 1045 meticulously, and use certified mail for security.
Redeeming due to immediate financial need	Depleting savings that could have grown and potentially missed opportunities.	Build and maintain a robust emergency fund. Explore other short-term borrowing options before touching long-term investments.
Not checking current I Bond rates	Making a decision based on outdated yield information.	Visit TreasuryDirect.gov for the most current I Bond rates before making a redemption decision.
Assuming all savings bonds are I Bonds	Applying the wrong redemption rules.	Differentiate between Series EE, Series I, and other savings bond types, as redemption rules can vary.
Not considering alternative investments	Potentially missing out on better returns or liquidity elsewhere.	Research current market conditions and other investment options before deciding to sell I Bonds.
Ignoring inherited bond rules	Complications with ownership transfer and redemption.	Consult TreasuryDirect.gov or a financial advisor for specific guidance on inherited savings bonds.

Decision rules (simple if/then)

• If you need the money within the first year, then you cannot sell your I Bonds because they have a one-year minimum holding period.
• If you need the money between one and five years after purchase, then you will forfeit the last three months of interest because this is a penalty for early redemption.
• If you have held your I Bonds for more than five years, then you can sell them without forfeiting any interest because the penalty period has passed.
• If you have a high-interest debt (e.g., credit card debt), then consider redeeming your I Bonds to pay off the debt because the interest saved on the debt will likely outweigh the interest earned on the bond.
• If you have a well-funded emergency fund, then you have more flexibility to redeem I Bonds for non-essential goals because your essential needs are already covered.
• If you purchased paper I Bonds, then you must complete Treasury Form PD 1045 and have it notarized because electronic redemption is not an option for paper bonds.
• If you are redeeming electronic I Bonds, then you should use TreasuryDirect.gov because this is the official platform for managing and redeeming them.
• If you are unsure about the tax implications of selling I Bonds, then consult a tax professional because the interest is taxable at the federal level.
• If you have inherited I Bonds, then you should check TreasuryDirect.gov for specific rules regarding transfer and redemption because inherited bonds have unique procedures.
• If your goal is long-term wealth preservation, then consider holding onto your I Bonds, especially if current interest rates are favorable, because they offer inflation protection.
• If you are experiencing financial hardship and need immediate cash, then redeeming your I Bonds may be necessary, even with the interest penalty, because your immediate financial stability is the priority.

FAQ

Can I sell I Bonds at any time?

No, you must hold I Bonds for at least one year before you can redeem them.

What happens if I sell I Bonds within five years?

If you redeem I Bonds within five years of their issue date, you will forfeit the last three months of interest earned.

How do I sell electronic I Bonds?

You can sell electronic I Bonds by logging into your TreasuryDirect.gov account and navigating to the redemption section.

How do I sell paper I Bonds?

For paper I Bonds, you need to fill out Treasury Form PD 1045, have it signed and witnessed, and then mail it to the Bureau of the Fiscal Service.

Is the interest from I Bonds taxable?

Yes, the interest earned on I Bonds is subject to federal income tax but is exempt from state and local income taxes.

Can I transfer I Bonds to someone else?

Generally, savings bonds are not transferable, but there are exceptions for inheritance.

What is the minimum amount I can redeem?

You can redeem any amount of an I Bond, but if you redeem a partial amount, the remaining portion must be at least $25.

How long does it take to get my money after redeeming I Bonds?

Funds are typically deposited into your linked bank account within a few business days after redemption.

Are there any fees to sell I Bonds?

No, there are no fees charged by the U.S. Treasury to redeem your I Bonds.

What this page does NOT cover (and where to go next)

• Detailed tax advice for specific situations: Consult a qualified tax professional.
• Investment advice on whether selling is the right decision for your portfolio: Speak with a financial advisor.
• Specifics on U.S. Treasury bond rates beyond I Bonds: Visit TreasuryDirect.gov for current rates.
• The process of purchasing I Bonds: Refer to guides on buying savings bonds.
• Estate planning considerations for savings bonds: Consult an estate planning attorney.