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USAA is The American Legion's preferred provider of financial services. Offering a range of top-rated financial and insurance products and services. USAA welcomes honorably discharged U.S. military veterans, active-duty troops and qualified family members and descendants of those who have served. USAA contributes funds to American Legion programs when members join through a dedicated channel:
usaa.com/legion or by calling toll-free at 1-877-699-2654.

Financial Questions & Answers

Financial Questions & Answers

Question:

I am holding approximately $40k in government savings bonds. How do I cash them in since the banks no longer provide this service? And what would the approximate IRS tax penalty be on the interest? -John

Answer:

Actually you’re only half right. Effective this year banks or other financial institutions stopped selling paper savings bonds. However, you can still redeem them at your local financial institution. But, you definitely don’t have to redeem them. In fact, if you visit www.treasurydirect.gov, you can learn about converting your paper bonds to electronic savings bonds. When you redeem savings bonds you’ll pay ordinary income tax on the interest you’ve earned over the years. It’s impossible with the limited information you’ve provided for us (we’d have to have your complete tax picture as well as the amount of interest) to give you an accurate answer as to the tax impact of redeeming your bonds.