I Savings Bonds
A Low-Risk, Liquid Savings Product
I Bonds are a low-risk, liquid savings product. While you own them they earn interest and protect you from inflation. You may purchase I Bonds via TreasuryDirect, at most local financial institutions or through payroll deduction. As a TreasuryDirect account holder, you can purchase, manage, and redeem I Bonds directly from your Web browser.
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Rates & Terms
I Bonds have an annual interest rate that reflects the combined effects of a fixed rate and a semiannual inflation rate. They are an accrual-type security. Interest, if any, is added to the bond monthly and is paid when you cash the bond.
I Bonds are sold at face value; i.e., you pay $50 for a $50 bond.
Minimum term of ownership: 1 year
*Interest-earning period: 30 years
Early redemption penalties:
• Before 5 years, forfeit 3 most recent months' interest
• After 5 years, no penalty
Interest earnings are exempt from State and local income taxes, but are subject to State and local estate, inheritance, gift, and other excise taxes.
Interest earnings are subject to Federal income tax.
Interest earnings may be excluded from Federal income tax when used to finance education (see education tax exclusions).
I Bond-Related FAQs
How is the earnings rate of an I Bond determined?
The earnings rate combines two separate rates:
A fixed rate of return, which remains the same throughout the life of the I Bond.
A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Public Debt announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.
What is the difference between EE and I bonds?
The biggest difference is the rate you receive on your bonds. Rates for EE Bonds depend on the issue date and are either a fixed rate of return or a variable rate based on 90% of 6-month averages of 5-year Treasury Securities yields, while rates for I Bonds are calculated by combining fixed rates of return and semi-annual inflation rates based on the CPI-U.
Are there tax benefits to using I Bonds to finance education?
Yes. Under the Education Savings Bond Program you might be able to completely or partially exclude savings bond interest from Federal income tax. This can occur when you pay qualified higher education expenses at an eligible institution or state tuition plan in the same calendar year you redeem eligible I Bonds and EE Bonds issued January 1990 and later. You aren't required to indicate that you intend to use the bonds for educational purposes when you buy them, but you must make sure the program's requirements are met; some apply when you buy the bond(s). See IRS Publication 970
Can I give an I Bond as a gift?
Electronic Bonds as gifts
You can purchase an electronic I Bond as a gift for someone and hold it in the "Gift Box" in your TreasuryDirect account until you are ready to transfer it to the recipient. If you purchase an electronic I Bond as a gift, you must provide the recipient's Social Security Number. The gift recipient must open or already have a TreasuryDirect account in order for you to be able to transfer the bond to that person. However, if the recipient has not opened a TreasuryDirect account, you may hold an EE or I Bond that you purchased as a gift until it reaches maturity.
Paper Bonds as gifts
I Bonds are great gifts for all occasions. An I Bond can be sent to you so you can present it personally or it can be sent directly to the person receiving the gift. When you buy the I Bond, ask for a free gift certificate. The word "gift" won't appear on the I Bond.
If you're buying an I Bond for a gift and you don't have the Social Security Number of the person you're buying the bond for, simply use your number. Even though your number will be printed on the bond, you'll incur no tax liability, and it won't count towards your annual purchase limit. The Social Security Number is used for tracking purposes only, such as in cases where the savings bond is lost, stolen, or destroyed.
Can I ever lose money in I Bonds?
No. They are U.S. Treasury securities backed by the U.S. Government. I Bonds even protect you from the effects of severe deflation—the earnings rate can't go below zero and the redemption value of your I Bonds can't decline.