Series I savings bonds work by pairing a fixed interest rate that stays with the bond for 30 years with a variable inflation rate that resets every six months, so the yield tracks the Consumer Price Index instead of falling behind it. The Treasury issues them, they’re backed by the full faith and credit of the federal government, and you buy them electronically through TreasuryDirect for as little as $25 and as much as $10,000 per Social Security Number per calendar year. You have to hold each bond for at least 12 months, and if you cash out before five years you give up the last three months of interest.
What the Bond Pays
Each I bond earns a composite rate built from two pieces. The fixed rate is set on the day you buy the bond and never changes for the life of that bond. The inflation rate is tied to the CPI-U and resets twice a year.1TreasuryDirect. Series I Savings Bonds Interest Rates The two combine into a single composite rate, and that rate can never fall below zero, even in a period of deflation.2eCFR. 31 CFR 359.13
The Treasury announces new fixed and inflation rates on May 1 and November 1. For bonds issued November 2025 through April 2026, the composite rate is 4.03% and the fixed rate is 0.90%.1TreasuryDirect. Series I Savings Bonds Interest Rates The fixed rate on bonds issued from May 2026 through October 2026 is also 0.90%, though the composite for that batch depends on the next CPI-U reading.
Here is the piece that trips people up. Your bond’s rate cycle runs from its own issue date, not from the Treasury’s announcement date. A bond bought in March gets its next rate change in September, regardless of what the Treasury announced on May 1. Interest accrues monthly and compounds semiannually, so every six months the interest already earned starts earning interest of its own.
Who Can Buy, and How Much
Ownership is open to U.S. citizens, U.S. residents, and civilian federal employees regardless of where they’re stationed.3TreasuryDirect. I Bonds U.S.-registered business entities (corporations, partnerships, LLCs) can buy through an EIN, and trusts and estates can buy through their taxpayer ID.
The purchase cap is $10,000 in electronic I bonds per SSN or EIN per calendar year.4TreasuryDirect. How Much Can I Spend on Savings Bonds A married couple can buy $20,000 combined by using both SSNs. A business or trust you control gets its own $10,000 limit under its EIN. If an individual account and an entity account happen to share the same SSN, each account can still purchase up to the limit.
One route that used to exist is gone. The Treasury previously let you buy an extra $5,000 in paper I bonds by directing your federal tax refund through IRS Form 8888; that program ended on January 1, 2025.5TreasuryDirect. Using Your Income Tax Refund to Buy Paper Savings Bonds The $10,000 electronic limit is now the only way to buy new I bonds.
How to Buy Them
All purchases run through TreasuryDirect. To open an individual account you need a Social Security Number, a U.S. street address, an email address, and a U.S. bank account with a routing number.6TreasuryDirect. Open an Account Once the account is active, go to BuyDirect, pick Series I, enter an amount between $25 and $10,000 (to the penny), and submit. The Treasury debits your linked bank account, and the bond shows up once the payment clears.7TreasuryDirect. Buying Savings Bonds
One warning about the platform. The interface is dated and the security is unforgiving. Enter your credentials wrong or trip a security flag and your account can be “hardlocked,” which cuts off online access entirely. Unlocking means mailing in FS Form 5444 with a signature guarantee from a bank officer or notary, and processing can take weeks.8TreasuryDirect. FS Form 5444 – Account Authorization Save your credentials somewhere you’ll actually find them again.
When You Can Cash Them In
Every I bond carries a mandatory 12-month holding period. You cannot redeem before that anniversary, and there are no exceptions outside of the disaster waiver mentioned below. Redeem between 12 months and five years, and the Treasury keeps the last three months of interest. Cash out an 18-month bond and you’re paid 15 months of interest.3TreasuryDirect. I Bonds After five years, the penalty is gone and you get everything you’ve earned.
To redeem an electronic bond, log into TreasuryDirect, open ManageDirect, and choose “Redeem securities.” The money lands in your linked bank account. Paper bonds get cashed at a bank, but banks aren’t required to cash savings bonds and each one sets its own rules on ID, documentation, and dollar limits. Call ahead. Paper bonds also have to be cashed for their full face value; no partial redemptions. Whichever bank cashes the bond issues the 1099-INT.9TreasuryDirect. Cashing EE or I Savings Bonds
An I bond earns interest for 30 years and then stops. After maturity the government still owes you the money, but the balance no longer grows and inflation eats into it.10Fiscal Data – U.S. Treasury. Fiscal Data Explains U.S. Treasury Savings Bonds If you’re holding paper bonds from the mid-1990s, check the issue dates; some may already have reached the end.
How the Interest Is Taxed
I bond interest is subject to federal income tax and exempt from state and local income taxes.11TreasuryDirect. Tax Information for EE and I Bonds You pick one of two reporting approaches. The default is to defer all reporting until you cash the bond or it reaches final maturity, which lets interest compound without a yearly tax bill. The alternative is to report the accrued interest each year on your federal return.
You can switch from deferral to annual reporting without asking the IRS, but you have to report every dollar of previously accrued interest in the year you switch, and the change applies to every savings bond tied to your SSN. Going the other way, from annual reporting back to deferral, requires filing IRS Form 3115.11TreasuryDirect. Tax Information for EE and I Bonds
The Education Exclusion
You may be able to exclude I bond interest from federal tax if you use the proceeds for qualified higher education expenses, but the requirements are narrow:
- The bond owner must have been at least 24 years old before the bond’s issue date. A bond registered in a child’s name will never qualify, even after the child turns 24.12TreasuryDirect. Using Bonds for Higher Education
- Qualified expenses are tuition and required fees at an eligible postsecondary institution, or contributions to a 529 plan or Coverdell ESA. Room and board do not count.13Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
- Married filing separately is not eligible.
- For tax year 2025, the exclusion phases out between $99,500 and $114,500 of modified AGI for single filers and between $149,250 and $179,250 for married filing jointly. Above those ceilings it disappears. 2026 figures had not been published at the time of writing.13Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
You claim the exclusion on IRS Form 8815 with the return for the year you cash the bonds. If you’re buying with a child’s education in mind, register the bonds in your own name or jointly with your spouse; putting the child on as owner disqualifies them.
Gifting and Inheritance
You can buy I bonds as gifts for anyone eligible to own one, provided the recipient has a TreasuryDirect account. The gift counts against the recipient’s $10,000 limit for the year they receive it, not yours and not the year you purchased it.4TreasuryDirect. How Much Can I Spend on Savings Bonds Purchased gifts sit in a Gift Box in your account until you deliver them, but the bond belongs to the recipient from the purchase date and earns interest from that day forward.14TreasuryDirect. FAQs About Undelivered Gift Bonds If the recipient has already hit their annual limit, hold the gift in the Gift Box and deliver it in January; it counts against next year’s cap while still accruing interest from when you bought it.
One thing that catches heirs off guard: savings bonds do not get a step-up in basis at death. All the deferred interest that accumulated while the original owner was alive becomes taxable to whoever redeems the bond. The estate’s personal representative can elect to report all that accrued interest on the decedent’s final return, which lifts the tax off the heir; without that election the heir pays when the bond is cashed.15Office of the Law Revision Counsel. 26 USC 135 – Income From United States Savings Bonds Used to Pay Higher Education Tuition and Fees If estate tax was paid on the bonds’ value, the heir may be able to claim a partial income tax deduction under the income-in-respect-of-a-decedent rules.