Savings Bonds

Know These Pitfalls Before Converting Paper Savings Bonds To Electronic Versions

Converting old paper savings bonds into electronic versions may initially seem like a good idea. It may not be a smart decision.  Here are three reasons why:

When the Treasury Department eliminated the sale of paper U.S. Savings Bonds in January 2012 (and offering electronic versions only) they began promoting the idea of converting older paper savings bonds into an electronic version, which requires opening up an online Treasury Direct account.

 1. When an electronic bond reaches final maturity, a 1099-INT will automatically be issued. A 1099-INT indicates the total amount of interest earned on a savings bond(s) and must be reported on ones Federal Income Tax in the year the bond reached final maturity. To learn when your paper bonds will reach final maturity use a complimentary savings bond calculator which includes a detailed Bond Inventory Report.

Individuals holding paper bonds will not automatically be issued a 1099-INT – even if that bond has reached final maturity. A 1099-INT will only be issued when the (paper) bond is either cashed in, or the individual chooses to report the interest income.*

2. The difference between the purchase price and the cash-in value of a bond is considered report-able interest income. Often bond owners don’t know the cash-in values for their bonds, or the total amount of interest each bond earned. In certain cases, it could be a substantial amount of interest that needs to be reported. Bonds will continue to earn interest beyond their face value until they reach their final maturity.

Important: Many EE bonds (depending on purchase date) are worth several times their face value. Most older paper series EE savings bonds were purchased at half of their face value (a $200 bond was purchased at $100). For example, if a $200 EE (paper) EE bond is worth $650 at redemption, $550 will be reported on a 1099-INT ($650 redemption value -$100 purchase price = $550 of report-able interest).

Individuals are often pleased to receive a lot more money than they expected for the bond, however, they are unpleasantly surprised upon receiving a 1099-INT for all of the interest earned. For many individuals the large amount of interest earned from matured bonds could be substantial and may result in needing to report more interest income than expected. In certain cases, the interest income from savings bonds could adversely affect an individual’s tax bracket, especially for seniors.  

3. With electronic bonds, it is incumbent upon the individual to remember to locate and print out the 1099-INT form. This requires accessing their Treasury Direct account and then find and print out the proper form.

Those redeeming paper bonds through their local financial institution or bank (or if mailed to the Treasury Department), a 1099-INT will be issued either on the spot or automatically mailed to the individual within the first few months following the year the bonds were redeemed.

By keeping paper bonds in their current status, individuals can use a complimentary bond calculator to quickly determine cash in values and total interest earned amounts. As a Member, they can use the Cash In Report that helps make smart redemption decisions. Armed with this information, informed bond investors can choose to systematically redeem their paper bonds and report the interest when they choose to. Once paper savings bonds are converted into an electronic format, they can not change back to the paper format and the investor loses that option to cash in at their discretion.

*IRS rules indicate that any interest earned over $10 on a savings bond(s) should be reported on ones federal income tax return in the year the bond(s) matures, regardless if the bond(s) has been redeemed. Most savings bond investor are not aware of this rule and do not report the interest until bonds are redeemed.  

About’s complimentary calculator provides cash in values, interest rates and a personalized, printable, color-coded, Savings Bond Inventory Report along with a “What This Means To You” explanation. For ongoing savings bond management & updated bond values via unique monthly e-Bond Statements, try a free 14-day trial of the Membership Advantages which includes a helpful Cash-In-Report.© and optional Bond Tips.

By: Jackie Brahney, Marketing Director,


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