Can I Sell My Government Treasury Bonds?
Treasury bonds are simply IOUs issued by the United States government. The U.S. Treasury issues a variety of bonds, including treasury bills for very short-term debt, notes for intermediate borrowing and bonds for longer-term borrowing. The Treasury also issues savings bonds, a popular vehicle for safe, conservative long-term saving. The United States is recognized for having a AAA credit rating, indicating exceptionally solid credit quality. This means that financial analysts believe there is almost no risk that the United States will default on its bond obligations, making U.S. savings bonds among the safest investents in the world when held to maturity.
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Savings Bonds
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Special liquidity provisions apply to U.S. savings bonds. You may redeem EE series savings bonds for their face value once they are 12 months old. However, if you redeem them before they are five years old, you will give up three months' worth of interest. You can cash them in at most federal savings banks, or, if you bought them electronically, via the U.S. Treasury's web site, treasurydirect.org. These bonds are not transferrable, however. You cannot normally assign them to another individual.
Tax Information
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When you redeem a U.S. savings bond, you will be issued an IRS Form 1099-INT, documenting the interest payments you received, which are taxable as ordinary income.
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Secondary Market Sales
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You can generally sell U.S. treasury bills, notes and bonds other than savings bonds on the open market through a broker. You receive the market price of the bond, minus any sales commissions payable to the brokerage. When interest rates are low, you will receive a higher price for the bond. When interest rates are higher, you will receive a lower price.
Tax Considerations
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Bond interest payments are taxable as income. However, if you sell a bond before it matures and you receive more for the bond than you paid for it, you must pay capital gains tax on the profit. If you held the bond for less than one year, you will pay the short-term capital gains tax. If you held it for longer than a year, you will pay the lower long-term gains tax. You can use capital losses from other transactions to cancel out your capital gains on the bonds, if any.
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