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 or with your IRS tax refund. As a TreasuryDirect account holder, you can purchase, manage, and redeem I Bonds directly from your Web browser.
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
- pay for education
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.
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 on savings bonds is subject to taxes imposed under the Internal Revenue Code of 1986. The bonds are exempt from taxation by any State or political subdivision of a State, except for estate or inheritance 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).