U.S. savings bonds work like this: you buy an electronic bond from the Treasury through TreasuryDirect, it earns interest that compounds every six months and stays locked inside the bond, and you collect the principal plus all accumulated interest when you cash it. The Treasury sells two series today, Series EE and Series I, each with a different interest formula. Both earn for up to 30 years, both are exempt from state and local income tax, and both can be redeemed after a one-year holding period, with a small penalty if you cash out before five years.
The Two Series and What They Pay
Series EE bonds earn a fixed interest rate set on the day you buy them, and that rate stays the same for the life of the bond. The Treasury guarantees that an EE bond will be worth at least double its purchase price after 20 years; if the fixed-rate interest hasn’t gotten there on its own, the Treasury makes a one-time adjustment at the 20-year mark to close the gap. EE bonds issued from November 2025 through April 2026 carry a fixed rate of 2.50%.1TreasuryDirect. EE Bonds
Series I bonds are built to keep pace with inflation. They pay a composite rate made of two parts: a fixed rate locked in at purchase, plus a variable inflation rate that resets every May and November based on changes in the Consumer Price Index for All Urban Consumers. For I bonds issued from November 2025 through April 2026, the composite rate is 4.03%, combining a 0.90% fixed rate with a 3.12% annualized inflation rate.2TreasuryDirect. Fiscal Service Announces New Savings Bonds Rates The fixed portion stays with the bond for its full life; the inflation portion rises or falls with the index.3U.S. Treasury Fiscal Data. Treasury Savings Bonds Explained
Both series are sold electronically through TreasuryDirect. The Treasury no longer issues paper EE bonds; paper I bonds exist only through the tax-refund route described below.4TreasuryDirect. Comparing EE and I Bonds
How the Interest Builds
Interest on both EE and I bonds compounds semiannually. Every six months the earned interest is added to the bond’s value, and the next period’s interest is calculated on that larger base. You never receive a check or direct deposit while you hold the bond. All earnings sit inside the bond until you cash it or it reaches final maturity.4TreasuryDirect. Comparing EE and I Bonds
Both series earn for 30 years from the issue date. After that, the bond stops earning entirely, so there is no reason to keep holding it past the 30-year mark.4TreasuryDirect. Comparing EE and I Bonds
How to Buy and the Annual Limits
You buy savings bonds by opening a free TreasuryDirect account at treasurydirect.gov. You need a Social Security Number, a working email address, and a U.S. bank account you can link for electronic transfers. You must also be a U.S. citizen, legal resident, or civilian government employee.5TreasuryDirect. Buying Savings Bonds
Electronic bonds are sold in any amount from $25 up to $10,000, to the penny. A bond for $75.38 is a valid purchase. The annual cap is $10,000 per series per Social Security Number, meaning one person can buy up to $10,000 in EE bonds and $10,000 in I bonds electronically in the same calendar year.6TreasuryDirect. Savings Bonds – How Much Can I Spend/Own?
The Tax-Refund Route for Paper I Bonds
There is one way to buy more than the $10,000 electronic cap in I bonds. When you file your federal tax return, you can direct up to $5,000 of your refund toward paper Series I bonds by filing IRS Form 8888. Paper bonds purchased this way come in $50 increments. Combined with the electronic limit, a single person can acquire up to $15,000 in I bonds per year.7TreasuryDirect. Questions and Answers About Series I Savings Bonds
Cashing In Your Bonds
You cannot cash a savings bond during its first 12 months. After that lockout, you redeem an electronic bond by logging into TreasuryDirect, selecting the bond, and submitting the request. The proceeds move to your linked bank account, usually within two to three business days.1TreasuryDirect. EE Bonds
If you cash a bond before you have held it for five years, you forfeit the last three months of interest. Redeem an I bond at 18 months and you receive 15 months of interest. The penalty is applied automatically.8TreasuryDirect. I Bonds
Paper bonds are a different story. You can typically cash them at a bank or credit union by bringing a valid photo ID such as a driver’s license. Banks are not required to cash bonds for non-customers, and some will only process redemptions for customers whose account is at least 12 months old.9Federal Reserve Financial Services. Savings Bond Redemptions Frequently Asked Questions You can also convert paper EE and I bonds to electronic form using the SmartExchange feature in TreasuryDirect and redeem them online.10TreasuryDirect. User Guide Sections 171 Through 180
Taxes on the Interest
Savings bond interest is subject to federal income tax but exempt from state and local income taxes. It is also subject to federal estate and gift taxes. You get to choose when the federal income tax hits by picking a reporting method.11TreasuryDirect. Tax Information for EE and I Bonds
The common choice is the deferred method. You wait until the year you cash the bond, or the year it hits final maturity, whichever comes first, and report all the accumulated interest then. Whoever pays you issues a 1099-INT for that year. The other option is the annual method: you report the interest each year as it accrues, even though no cash has moved. Pick the annual method and it applies to every savings bond you own now and every one you buy later.12Internal Revenue Service. Topic No. 403, Interest Received
The Education Exclusion
You may be able to exclude savings bond interest from federal income entirely if you use the redemption proceeds for qualified higher education expenses, which includes tuition and required fees at an eligible institution, or contributions to a 529 plan or Coverdell Education Savings Account. The bond must have been issued after 1989, and the owner must 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 that child turns 24.13TreasuryDirect. Using Bonds for Higher Education
The exclusion phases out at higher incomes. For tax year 2025, it begins to shrink at modified adjusted gross income of $99,500 for single filers ($149,250 for joint filers) and disappears entirely at $114,500 ($179,250 joint). These thresholds adjust annually; check the current Form 8815 instructions for updated numbers.14Internal Revenue Service. Publication 970 – Tax Benefits for Education If your redemption proceeds are larger than your qualified expenses, the exclusion applies only to the proportional share of interest tied to the expenses you actually paid. You claim it on IRS Form 8815.15Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
At 30 Years and After the Owner’s Death
Final maturity at 30 years is a hard stop. The bond keeps its value but earns nothing further, and there is no automatic payout; you still have to cash it. Because federal tax on the full accumulated interest comes due no later than final maturity, letting a matured bond sit is simply tax owed on money that is no longer growing.16TreasuryDirect. Cashing Old Bonds From Other Series
What happens to a bond when the owner dies depends on its registration. For a bond with a co-owner, the surviving co-owner automatically becomes sole owner with no probate required; if both co-owners have died, the bond becomes part of the estate of whichever one died last. For a bond with a named beneficiary (a payable-on-death registration), the beneficiary takes ownership after providing proof of death. If the beneficiary died first, the bond is treated as if registered in the owner’s name alone and passes through the owner’s estate.17eCFR. 31 CFR Part 315 Subpart L – Deceased Owner, Coowner or Beneficiary How the accumulated interest gets taxed after a death can go several ways depending on the facts; the IRS points to Publication 559 and Publication 550 for the specifics.18TreasuryDirect. Death of a Savings Bond Owner