How to Cash a Bond if It's Not Yet Mature

by Eric Bank, Demand Media Google

You don’t have to wait until a bond matures to turn it into cash. The issuer -- a government agency or a corporation -- sells bonds and collects cash. Later on, when a bond matures, the issuer must pay the bond’s face value to the bondholder. If you have a bond and want to cash it in before maturity, you’ll have to sell it. If the bond is “putable,” you can sell it back to the issuer.

Sell a Bond

Step 1

Identify the bond. If you don’t already know it, find the bond’s identifying number, which s based on the Committee on Uniform Securities Identification Procedures, or CUSIP. The CUSIP number should be listed on the invoice you paid when you bought the bond. If you don’t know the CUSIP, you can look it up for free at several websites, including ones provided by Fidelity, Standard & Poor’s and Sallie Mae.

Step 2

Price the bond. Use the CUSIP number to get the current price of the bond. Many broker sites have quotation functions that will tell you what buyers are bidding for the bond and the price that sellers are asking. The price is expressed as a percentage of the bond’s face value.

Step 3

Enter a sell order on your broker’s order page. You can sell at the current market price or you can set a limit price, which is the minimum you are willing to accept.

Step 4

Check your order status. When the sale is complete, the status page will tell you how much you received, including any accrued interest and sales commission. The broker will deposit the cash in your brokerage account three business days after the sale date.

Put a Bond

Step 1

Check with the broker or issuer to see if the bond is “putable.” Some issuers embed put options in their bonds. A putable bond gives you the right to sell, or put, the bond to the issuer for a fixed price on or after the put date.

Step 2

Put the bond. If your broker is holding the bond, it will handle the transaction for you. If you are holding the bond certificate, contact the issuer’s investor relations department and identify the transfer agent. The agent will have you fill out paperwork, which you’ll send in with the bond certificates. The agent will cash in the bond, perhaps subtract a fee, and send you the proceeds, including accrued interest.

Step 3

Receive the tax form. Whether you sell or put the bond, you will receive Form 1099-B the following January from your broker or transfer agent. The form reports the gain or loss on the bond’s sale. Gains are taxable income, even if the bond is a tax-free municipal. If you held the bond for more than a year, the gain is long term and subject to lower tax rates.

Items you will need

  • A bond


  • As of 2013, the tax rate on long-term capital gains ranges from 20 percent to 0 percent, depending on your gross income. Short-term capital gains are taxed as ordinary income at your normal rate, as is interest income. Report your capital gains or losses on bond sales using Form 8949.


  • When you buy a bond at a discount -- for a price less than its face value -- you must recognize the discount as income. If the bond was issued at discount, you’ll receive Form 1099-OID each January reporting the discount income for the previous year. Bond discount affects your capital gain or loss when you sell a bond. Consult with an accountant or tax preparer to help you report the sale of a discount bond correctly.

About the Author

Based in Chicago, Eric Bank has been writing business-related articles since 1985, and science articles since 2010. His articles have appeared in "PC Magazine" and on numerous websites. He holds a B.S. in biology and an M.B.A. from New York University. He also holds an M.S. in finance from DePaul University.

Photo Credits

  • Adam Gault/Digital Vision/Getty Images