U.S. savings bonds work like this: you lend money to the federal government by buying a bond through TreasuryDirect, and the bond earns compounding interest for up to 30 years until you cash it in. The Treasury sells two kinds today, Series EE and Series I, and both are backed by the U.S. government, capped at $10,000 per series per person per year, and exempt from state and local income taxes.1TreasuryDirect. Tax Information for EE and I Bonds The details that follow determine how much you actually earn and how much of it you keep.
The Two Types You Can Buy Today
Series EE bonds pay a fixed interest rate that is set on the day you buy and never changes. The Treasury also guarantees that an EE bond will be worth at least double its purchase price after 20 years; if regular interest hasn’t gotten it there, a one-time adjustment at the 20-year mark closes the gap. EE bonds issued from November 2025 through April 2026 carry a fixed rate of 2.50%.2TreasuryDirect. EE Bonds
Series I bonds are built to keep pace with inflation. Their rate is a composite of two parts: a fixed rate that stays locked in for the life of the bond, and a variable inflation rate that resets every May and November based on changes in the Consumer Price Index for All Urban Consumers. I bonds issued from November 2025 through April 2026 pay a composite 4.03%, made up of a 0.90% fixed rate and a 3.12% annualized inflation rate.3TreasuryDirect. Fiscal Service Announces New Savings Bonds Rates
Both series mature at 30 years. Both are bought electronically through TreasuryDirect. The Treasury no longer prints paper EE bonds at all, and paper I bonds are only available through the tax-refund method described below.4TreasuryDirect. Comparing EE and I Bonds
How the Interest Compounds
Interest on both series compounds semiannually. Every six months the interest earned so far is added to the bond’s principal, and the next period’s interest is calculated on that larger base. You don’t receive any of the interest as cash along the way. It stays inside the bond until you cash it or it hits final maturity.4TreasuryDirect. Comparing EE and I Bonds
For an EE bond, the growth is predictable from day one because the rate never moves, and the 20-year doubling guarantee sets a floor on your return. For an I bond, the inflation piece can rise or fall every six months, so your rate this year and your rate two years from now may look nothing alike. The fixed piece of the I bond’s rate, though, stays with that bond for its full 30 years.5U.S. Treasury Fiscal Data. Treasury Savings Bonds Explained
After 30 years, the bond stops earning. There is no reason to hold it any longer than that.
Buying a Bond
To buy savings bonds, you need a Social Security Number, and you must be a U.S. citizen, legal resident, or civilian government employee. You open a free account at treasurydirect.gov with an email address and a U.S. bank account. From there you fund your purchases by electronic transfer from that linked bank.6TreasuryDirect. Buying Savings Bonds
Electronic bonds can be purchased in any amount from $25 up to $10,000, down to the penny. So a bond can be for $75.38 if that’s what you want. The annual limit is $10,000 per series per Social Security Number, meaning one person can buy up to $10,000 in EE bonds and another $10,000 in I bonds each calendar year.7TreasuryDirect. Savings Bonds – How Much Can I Spend/Own?
The One Way to Buy More I Bonds
When you file your federal tax return, you can direct up to $5,000 of your refund into paper Series I bonds by filing IRS Form 8888. Paper bonds bought this way come in $50 increments. That means a single filer can end up with as much as $15,000 in I bonds in a year: $10,000 electronic plus $5,000 in paper through the refund.8TreasuryDirect. Questions and Answers About Series I Savings Bonds
When You Can Cash In
You cannot cash a savings bond during its first 12 months. That is a hard rule. After the first year, you can redeem an electronic bond by logging into TreasuryDirect, selecting the bonds you want to cash, and submitting the request. The money lands in your linked bank account within about two to three business days.2TreasuryDirect. EE Bonds
There is one more timing penalty to know about. If you cash a bond before you’ve held it for five years, you lose the last three months of interest. Cash an I bond at 18 months and you get 15 months of interest. TreasuryDirect deducts the penalty automatically. Hold the bond past the five-year mark and you get every penny of what it earned.9TreasuryDirect. I Bonds
Older paper savings bonds can generally still be cashed at a bank or credit union with a valid photo ID, though banks aren’t required to cash bonds for people who aren’t customers, and some require the customer relationship to be at least 12 months old.10Federal Reserve Financial Services. Savings Bond Redemptions Frequently Asked Questions The alternative is to convert paper EE and I bonds to electronic form through the SmartExchange feature in TreasuryDirect and redeem them online.11TreasuryDirect. User Guide Sections 171 Through 180
What You’ll Owe in Taxes
Interest on savings bonds is subject to federal income tax and to federal estate and gift taxes, but it is exempt from state and local income taxes. You choose when to pay the federal tax by picking one of two methods.1TreasuryDirect. Tax Information for EE and I Bonds
- The deferred method is what most people use. You wait to report the interest until the year you cash the bond or it reaches final maturity, whichever comes first. The payer sends you a 1099-INT for that year.
- The annual method has you report interest each year as it accrues, even though no cash has changed hands. If you elect this, it applies to every savings bond you own and every one you buy afterward.12Internal Revenue Service. Topic No. 403, Interest Received
If you and someone else both paid into the same bond as co-owners, each of you reports interest in proportion to what you contributed. In community property states, spouses filing separate returns each report half.1TreasuryDirect. Tax Information for EE and I Bonds
The Education Exclusion
You may be able to skip federal tax on savings bond interest entirely if you use the redemption proceeds for qualified higher education expenses: tuition and required fees at an eligible institution, or contributions to a 529 plan or Coverdell Education Savings Account. Two conditions bite here. The bond has to have been issued after 1989, and the owner has to have been at least 24 years old before the bond’s issue date. A bond registered in a child’s name does not qualify, even after the child grows up.13TreasuryDirect. Using Bonds for Higher Education
The exclusion also phases out at higher incomes. For tax year 2025 it begins to shrink at modified adjusted gross income of $99,500 for single filers and $149,250 for joint filers, and disappears entirely at $114,500 and $179,250 respectively. These thresholds move each year with inflation, so check the current IRS Form 8815 instructions before you count on the benefit.14Internal Revenue Service. Publication 970 – Tax Benefits for Education If your total redemption proceeds are more than your qualified expenses, only a proportional share of the interest can be excluded. You claim the exclusion on IRS Form 8815 with your return.15Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
What Happens at Year 30
Both EE and I bonds stop earning interest 30 years after their issue date. There is no automatic payout when that happens. You still own the bond, but its value is frozen. Because you’ll owe federal tax on all the accumulated interest whenever you finally do cash it, there’s no benefit to letting a matured bond sit.16TreasuryDirect. Cashing Old Bonds From Other Series Cash it, take the money, and move on.