How to Sell Treasury Bonds: Steps, Redemption, and Taxes

To sell Treasury bonds, the path depends on what you own: marketable Treasury bonds, notes, and bills are sold through a bank, broker, or dealer on the secondary market, while Series EE and I savings bonds are redeemed for cash through TreasuryDirect or a financial institution. There is no “sell” button inside TreasuryDirect for marketable securities. Both types have minimum holding periods, and selling or redeeming early can cost you interest or expose you to a price below what you paid.¹

Holding Periods You Have to Clear First

Marketable Treasury securities bought through TreasuryDirect cannot be transferred or sold for 45 calendar days after the issue date, or the full term of the security, whichever is shorter.² A 4-week Treasury bill bought through TreasuryDirect cannot be sold at all because it matures before the hold expires.¹ Securities purchased through a brokerage account are not subject to this TreasuryDirect-specific restriction and can generally be sold at any time.

Series EE and Series I savings bonds require a 12-month holding period from the issue date before you can cash them.³ Redeem either type before five years and you forfeit the last three months of interest.⁴ A bond cashed at 18 months pays 15 months of interest. The redemption value will never drop below what you originally paid.⁵ After five years, no penalty applies.

Selling a Marketable Treasury Bond

You cannot sell a marketable Treasury security directly from your TreasuryDirect account. To sell before maturity, you have to work through a bank, broker, or dealer.¹

If Your Bonds Are Already at a Broker

If you hold Treasury bonds or notes in a brokerage account at a firm like Fidelity, Schwab, or Vanguard, selling is straightforward. Contact your broker or place a sell order through the platform, the same way you would for any other bond. The sale happens on the secondary market, and your proceeds reflect the current market price rather than the face value. Most firms handle it with no special forms and normal trade settlement.

If Your Bonds Are in TreasuryDirect

If you bought directly through TreasuryDirect, the security has to be transferred out to a broker or dealer’s account in the commercial book-entry system before it can be sold.⁶ You will need a brokerage account already set up to receive the transfer. Once the 45-day holding period is behind you, initiate the transfer through TreasuryDirect. The security moves in $1,000 increments.² After the broker receives it, they sell it on your behalf.

If you think you might sell before maturity, buying through a brokerage account in the first place spares you this transfer step.

What You’ll Get on the Secondary Market

When you sell before maturity, you receive the current market price, which can be more or less than face value. Price moves inversely with interest rates. If rates have risen since you bought, the price drops below face value. If rates have fallen, the price rises above face value.⁷ Hold to maturity and you get full face value back regardless of what happens in between. That price risk is the trade-off for selling early.

Redeeming Savings Bonds

Savings bonds work differently. There is no secondary market and no market price. You redeem them for their current value, which is what you paid plus accumulated interest, minus the three-month interest penalty if you’re cashing before five years.

Electronic EE and I Bonds in TreasuryDirect

Log in, select the bond, and choose full or partial redemption.⁸ Partial redemptions are available only for electronic bonds. After you submit, proceeds deposit into your linked bank account.

Paper Bonds at a Bank

If your bank is an authorized paying agent, walk in with the bonds and a government-issued photo ID. Funds usually go straight into your account there. Banks vary in how much they will cash at one time, and some do not cash savings bonds at all, so call ahead.⁹ A paper savings bond must be cashed for its full value; partial redemption is not an option.

Paper Bonds by Mail

If a bank cannot process the redemption, or you prefer to handle it by mail, send the bonds with FS Form 1522 to Treasury Retail Securities Services.¹⁰ The form asks for serial numbers, issue dates, your Social Security number, and direct deposit information. If the total redemption value is $1,000 or less, sign the form and include a copy of your driver’s license, passport, or other government ID. Above $1,000, you have to sign in the presence of a notary or certifying officer. This route takes several weeks.

Taxes on What You Receive

Treasury securities get favorable state tax treatment, but federal tax still applies. How it works depends on what you sold or redeemed.

Savings Bond Interest

Interest on EE and I savings bonds is subject to federal income tax and exempt from state and local income taxes.¹¹ Most people defer reporting the interest until they cash the bond or it matures. At that point you receive a 1099-INT showing all interest the bond earned over its lifetime, and that full amount goes on your federal return for the year you cashed it.¹² The rate depends on your income bracket that year.

One exception: if you use savings bond proceeds for qualified higher education expenses, you may be able to exclude the interest from federal income tax entirely. For 2026, the exclusion begins phasing out at a modified adjusted gross income of $101,800 for single filers and $152,650 for married filing jointly, and disappears at $116,800 and $182,650. The bonds must have been issued after 1989, and you must have been at least 24 when you bought them. Claim the exclusion on IRS Form 8815.

Capital Gains on Marketable Bonds

Selling a Treasury bond or note before maturity can produce a capital gain or loss. Sell for more than your adjusted basis and you have a gain; sell for less and you have a loss.¹³ The interest component of the sale is still exempt from state and local tax, but the gain itself follows standard capital gains rules.

Bonds held longer than a year qualify for long-term capital gains rates. For 2026:

0% on taxable income up to $49,450 (single), $98,900 (married filing jointly), or $66,200 (head of household)
15% on taxable income up to $545,500 (single), $613,700 (married filing jointly), or $579,600 (head of household)
20% above those thresholds

Held one year or less, gains are short-term and taxed at your ordinary income rate. A net capital loss can offset up to $3,000 of other income ($1,500 if married filing separately), with the rest carried forward.¹³ Gains and losses from bond sales go on Form 8949 and Schedule D.

Redeeming Bonds After the Owner’s Death

The rules above assume you own the bond. If you are inheriting one, the path is different.

When the bond names a co-owner or beneficiary, that person can generally redeem by presenting a death certificate and valid ID, either at a bank or through TreasuryDirect. Electronic bonds in TreasuryDirect are reissued to the surviving owner, and Treasury reports the interest earned up to that point on a 1099-INT under the deceased person’s name and Social Security number. The new owner owes tax only on interest earned after the reissue.¹²

If bonds were registered only in the deceased person’s name and the estate’s total Treasury holdings are $100,000 or less in redemption value, a family member can act as a voluntary representative without probate, using FS Form 5336 along with certified copies of the death certificate.¹⁴ The representative must be a surviving spouse, blood relative, or legally adopted child, at least 18, and able to certify that no court-appointed legal representative exists or will be appointed. Above $100,000, Treasury requires formal court administration.

For paper savings bonds inherited without a named co-owner, whoever cashes the bond receives a 1099-INT covering all interest earned over its full life. To avoid paying tax on interest that accrued during the previous owner’s lifetime, that person follows the procedures in IRS Publication 550 to allocate the interest.¹²

1
TreasuryDirect. Selling a Treasury Marketable Security
2
eCFR. 31 CFR Part 363 Subpart F – Marketable Treasury Securities
3
TreasuryDirect. I Bonds
4
TreasuryDirect. EE Bonds
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eCFR. 31 CFR 359.7 – If I Redeem a Series I Savings Bonds Before Five Years After the Issue Date, Is There an Interest Penalty
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TreasuryDirect. How Do I – TreasuryDirect
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TreasuryDirect. Understanding Pricing and Interest Rates
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TreasuryDirect. Redeem Savings Bonds – TreasuryDirect
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TreasuryDirect. Cashing EE or I Savings Bonds
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TreasuryDirect. Special Form of Request for Payment of United States Savings and Retirement Securities
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Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation
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TreasuryDirect. Tax Information for EE and I Bonds
13
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
14
TreasuryDirect. Disposition of Treasury Securities Belonging to a Decedents Estate Being Settled Without Administration