Preparing for the End of the Penny

In our February 2025 Bottom Line Newsletter, we highlighted growing momentum around the idea of eliminating the penny due to rising costs and declining usage. Now, that proposal has become official. The U.S. Treasury Department has confirmed plans to end penny production, with new coins expected to stop entering circulation in early 2026. This historic decision marks a major shift in U.S. currency policy and has practical implications for consumers, businesses, and retailers alike.

Why the Penny Is Being Phased Out

The main driver is cost. Although each penny has a face value of one cent, it costs nearly four cents to produce. In 2024 alone, the U.S. Mint created more than 3 billion pennies, leading to an annual loss of over $85 million. Discontinuing production is expected to save the government approximately $56 million each year.

The decision has support across party lines and was formally requested by President Trump earlier this year. With the Mint’s final order of penny blanks already placed, production will stop once those materials are used.

What This Means for Cash Transactions

While existing pennies will remain legal tender, fewer coins will be available over time. As a result, cash transactions will need to round to the nearest five cents. For example, a total of $10.02 may round down to $10.00, while $10.03 may round up to $10.05.

This rounding applies only to cash payments. Credit card, debit card, and mobile transactions will still process exact amounts. To assist with this transition, state and local governments are expected to provide guidance for businesses on sales tax collection and pricing compliance.

What Businesses Should Do

Businesses that rely on cash payments should begin preparing for the change. Steps to consider include:

• Updating point-of-sale systems to support rounding
• Training employees on new procedures and customer communication
• Reviewing pricing and tax processes to ensure compliance

Although the financial impact is expected to be minimal, being prepared will help businesses avoid confusion and ensure smooth day-to-day operations.

The Penny’s Historical Significance

The penny has been part of American life since 1793, making it one of the first coins issued by the U.S. Mint. In 1909, Abraham Lincoln became the first U.S. president featured on a coin when his portrait was added to the penny.

Over time, the coin’s composition shifted from copper to a blend of zinc and copper, and its role in commerce gradually diminished. Despite its declining use in transactions, the penny has remained a familiar part of American culture—appearing in everyday expressions, traditions, and personal collections.

As the penny phases out, small but important adjustments will follow. LMC is here to help you navigate the operational and financial impact. For any questions or concerns, please contact an LMC professional.