I Savings Bonds
Use I Bonds to
- save in a low-risk product that helps protect your savings from inflation
- supplement your retirement income
- give as a gift (Giving Savings Bonds as Gifts)
- pay for education (Using Bonds for Education)
|What is an I Bond?||
A security that earns interest based on combining a fixed rate and an inflation rate.
|What interest does an I Bond earn?||
A combination of a fixed rate and an inflation rate that can and usually does change twice-a-year.
|Is it taxable?||
Federal income tax: Yes
State and local income tax: No
Using the money for higher education may keep you from paying federal income tax on your savings bond interest. Using EE or I Bonds for Education
|Paper or electronic?||
Electronic: $25 for a $25 I Bond
$10,000 each calendar year for each Social Security Number. You may buy up to $10,000 in electronic I Bonds, and up to $5,000 in paper I Bonds bought with your IRS tax refund.
Electronic: Any amount from $25 to $10,000 to the penny. For example, with electronic bonds, you could buy an I Bond for $50.23.
|How long must I keep an I Bond?||
I Bonds are meant to be long-term investments. They continue to earn interest for up to 30 years.
You can cash them in after one year. But if you cash them in before five years, you lose the last three months of interest. (If you cash in an I Bond after 18 months, you get the first 15 months of interest.)
|How do I buy an I Bond?||
Electronic: Through your TreasuryDirect account
You can arrange to buy electronic bonds in your TreasuryDirect account through payroll direct deposit.
How do I Bonds earn interest?
Interest on an I Bond rates is a combination of two rates:
- A fixed rate of return which remains the same throughout the life of the I Bond
- A variable inflation rate which we calculate twice a year, based on changes in the nonseasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy (CPI-U for March compared with the CPI-U for September of the same year, and then CPI-U for September compared with the CPI-U for March of the following year).
Interest is earned on the bond every month. (However, values displayed by the Savings Bond Calculator for bonds that are less than 5 years old do not include the latest 3 months of interest. These values reflect the interest penalty.)
The interest is compounded semiannually: Every six months, on the 6th and 12th month anniversaries of the issue date, all interest the bond has earned in previous months is in the bond's new principal value on which interest is earned for the next 6 months.
For more details: Calculating Interest Rates on I Bonds
To see specifics for your I Bond: Savings Bond Calculator