EE Savings Bond Question


H

herlihyboy

We had been purchasing EE savings bonds in small denominations over the
past 4 years or so. We bought the paper kind where you pay half (i.e.,
we pay $25 for a $50 bond) and I think they mature in 20 or 30 years.
We only have about $750 right now.

We had purchased them with the intent of a small savings amount toward
college, kid expenses, etc. We have decided to cash them in as we are
working on getting out of debt.

I'm guessing I can just take these to the bank from where I purchased
them to turn them. How does the return work on the paper EE bonds?
For example, if I cash in a bond that I paid $25 for 4 years ago, will
it now be worth slightly more? Are there penalties where it could end
up being worth less? Also, will I pay capital gains taxes on my 2005
return next year?

Thanks in advance,

Ryan
 
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E

Elle Navorski

Yes, your EE savings bonds are definitely worth more today than when you
first bought them. You can find out the exact value of your EE savings
bonds via the calculator at
http://www.publicdebt.treas.gov/sav/savcalc.htm

Cash them in close to the beginning of the month, not the end, as interest
is credited the first of every month.

My experience is almost any bank will cash your EE bonds. The web site
below confirms this. The banks I've used gave me cash at no charge. If I
wanted a check, I had to pay a fee. From the main site above: "You're
allowed to cash up to $1,000 worth of bonds at one time based upon
documentary identification alone."

If the EE bonds are less than five years old, you will pay a three-month
interest penalty. The calculator above takes this penalty into account.

You pay no capital gains tax on these bonds, nor any state or local tax.
You pay only federal income tax on the interest, to be paid with your 2005
taxes. The bank at which you cash the EE bonds is obliged to send you a
1099-Int around January of next year for your tax records.

IMO keeping one's emergency cash in EE or other U.S. savings bonds is a
good idea. They're easily liquidated, and they pay better interest than a
money market account.

You might want to peruse the following site for any other questions you
have.

http://www.publicdebt.treas.gov/sav/savinvst.htm
 

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