The best time to cash in savings bonds is after you have held them at least five years (to avoid losing three months of interest), before they hit 30 years (when they stop earning), and — for Series EE bonds issued since May 2005 — at or after the 20-year mark when the Treasury’s doubling guarantee kicks in. Within those windows, redeem on or just after the first of a month, and pick a tax year when your income is lower than usual.
The 30-Year Hard Stop
Both Series EE and Series I bonds earn interest for exactly 30 years from their issue date, then stop. The rule for EE bonds sits in 31 CFR § 351.5,1eCFR. 31 CFR Part 351 – Offering of United States Savings Bonds, Series EE and Series I bonds follow the same 30-year lifespan under 31 CFR § 359.5, built as an original 20-year maturity plus a 10-year extension.2eCFR. 31 CFR Part 359 – Offering of United States Savings Bonds, Series I
Once a bond passes 30 years, every additional day you hold it is a day inflation erodes your purchasing power with nothing added on the other side. The tax bill also arrives whether you cash the bond or not: for electronic bonds, the Treasury moves the money into a Certificate of Indebtedness in your TreasuryDirect account at maturity and issues a 1099-INT for that year.3U.S. Department of the Treasury TreasuryDirect. Tax Information for EE and I Bonds
If you have older Series E bonds (issued between 1941 and 1980), they reached final maturity long ago and are earning nothing. Cash them as soon as you can.
The 20-Year Mark for Series EE Bonds
Series EE bonds issued since May 2005 come with a guarantee that changes the math on when to redeem: the Treasury promises the bond will be worth at least twice what you paid for it after 20 years. If the fixed rate has not gotten the bond there on its own, the Treasury makes a one-time adjustment at the 20-year mark to close the gap.4TreasuryDirect. EE Bonds Issued May 2005 and Later That works out to about a 3.5% annualized return over the 20 years, well above the current fixed rate of 2.50% for EE bonds issued between November 2025 and April 2026.5TreasuryDirect. EE Bonds
The practical rule for EE bonds: cashing before year 20 forfeits the most valuable part of the return. After the adjustment, the bond continues earning its lower fixed rate for another decade, so you can then weigh whether that rate beats what you would earn moving the money elsewhere.
The Five-Year Penalty Threshold
You cannot redeem any savings bond during the first 12 months after purchase. After that, you can cash anytime, but redeeming before five full years costs you the most recent three months of interest.6U.S. Department of the Treasury TreasuryDirect. Cash EE or I Savings Bonds For Series EE bonds, 31 CFR § 351.35(e) sets this out: the earning period is reduced by three months, though the redemption value never drops below what you originally paid.7eCFR. 31 CFR 351.35 – Series EE Bonds Issued May 2005 and Later
Concretely, if you cash an I bond after 18 months, you receive 15 months of interest.8TreasuryDirect. I Bonds Past the five-year mark, the penalty disappears and you keep everything you have earned.
One exception to the one-year lockup: if you live in an area covered by a federal disaster declaration, you can cash newer bonds by calling the Treasury at 844-284-2676 or submitting a certified FS Form 5512 with “DISASTER” written on the envelope and on the form.9TreasuryDirect. Affected by a Disaster
Pick the Right Day of the Month
Interest on both EE and I bonds is credited on the first day of each month.10eCFR. 31 CFR Part 351 Subpart B – Maturities, Redemption Values, and Investment Yields of Series EE Savings Bonds Cashing on October 31 pays exactly the same as cashing on October 2. Waiting one more day, to November 1, adds a full extra month of interest. Never redeem in the last days of a month if you can wait; redeem on or after the first.
Interest compounds semiannually, meaning six months of accrued interest is added to the bond’s principal twice a year. Your specific compounding dates depend on your issue month. To see a bond’s exact current value, the next accrual date, and its interest history, the Treasury offers a free calculator for paper bonds at treasurydirect.gov/savings-bonds/savings-bond-calculator, and electronic bond values are visible in your TreasuryDirect account.11TreasuryDirect. Paper Savings Bond Calculator
Ride Out High Rates on I Bonds
Series I bonds earn a composite rate combining a fixed rate that never changes for the life of the bond with a variable inflation rate that resets every six months. The Treasury announces new inflation rates each May 1 and November 1, but the rate on your particular bond changes six months from your issue date, not on the announcement dates.12TreasuryDirect. I Bonds Interest Rates
The composite rate formula is: fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate).13U.S. Treasury Fiscal Data. I Bonds Interest Rates When inflation is high, the composite rate spikes, and it usually pays to hold through that six-month window rather than exit mid-cycle. When a reset drops your rate to something near zero, that same window is often the right time to move the money.
Check your bond’s issue month against the Treasury’s rate announcements to see which cycle applies. A bond issued in March, for instance, resets each March and September.
Choose a Lower-Income Tax Year
Savings bond interest is subject to federal income tax but exempt from state and local income taxes,14Internal Revenue Service. Topic No. 403, Interest Received and it is taxed as ordinary income rather than at the lower capital gains rate. Most owners defer reporting the interest until they cash the bond or it reaches final maturity, whichever comes first.3U.S. Department of the Treasury TreasuryDirect. Tax Information for EE and I Bonds
Because deferred interest hits your return in a single year, redemption timing can push you into a higher bracket. A year with lower income than usual — the year you retire, take a sabbatical, or have a gap between jobs — is often the cheapest year to cash. If you own several bonds, spreading redemptions across two or more tax years keeps the added income in each year manageable.
You can also choose to report interest each year as it accrues instead of deferring. If you switch to annual reporting, you must report all previously accrued but unreported interest in the year of the switch and use the annual method for every EE and I bond you own going forward.15Internal Revenue Service. Publication 550, Investment Income and Expenses Switching back to deferral later requires IRS permission via Form 3115.
The Education Exclusion (If You Qualify)
If you cash bonds in the same tax year you pay qualified higher education expenses (tuition and fees at an eligible postsecondary institution) for yourself, your spouse, or a dependent, you may be able to exclude the interest from federal income tax entirely.16Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees Every one of these conditions has to be met:
- The bond was issued after December 31, 1989.
- You were at least 24 years old before the bond’s issue date.17TreasuryDirect. Using Bonds for Higher Education
- You do not file as married filing separately.
- For 2026, the exclusion phases out starting at a modified adjusted gross income of $101,800 for single filers ($152,650 for married filing jointly) and disappears at $116,800 ($182,650 joint).
- You cash the bonds and pay the qualifying expenses in the same tax year.
If redemption proceeds exceed qualified expenses, the exclusion applies only to the portion of interest matching those expenses. Claim it on IRS Form 8815 with your return.18Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 Note the age requirement: bonds you bought as a young adult or that were bought for you as a child by a parent under 24 will not qualify, no matter when you cash them.
Putting the Timing Rules Together
For most owners, the sequence looks like this. Do not touch the bond in year one. If you must cash between years one and five, accept that you will lose three months of interest. If you own a Series EE bond issued May 2005 or later, hold to at least the 20-year mark to capture the doubling. For every bond, redeem before the 30-year deadline. Within whatever window you choose, cash on or just after the first of a month, in a tax year when your other income is lower, and — if you have a student in the family — check whether the education exclusion applies before you sign the form.