To invest in US Treasury bonds, you open a free account at TreasuryDirect and buy straight from the government, or you buy on the secondary market through a brokerage. Either route gives you access to bills, notes, bonds, TIPS, floating rate notes, and Series EE and I savings bonds, all backed by the federal government and all exempt from state and local income tax on the interest they pay.
What You Can Buy
The Treasury issues two broad categories: marketable securities you can resell, and non-marketable savings bonds you hold until redemption.
Marketable Securities
Treasury Bills mature in one year or less, with terms of 4, 6, 8, 13, 17, 26, and 52 weeks. They pay no periodic interest. You buy at a discount and receive full face value at maturity, and the difference is your return.1TreasuryDirect. Treasury Bills2TreasuryDirect. Understanding Pricing and Interest Rates
Treasury Notes run 2, 3, 5, 7, or 10 years and pay a fixed rate every six months.3TreasuryDirect. Treasury Notes Treasury Bonds mature in 20 or 30 years and also pay semiannual interest at a fixed rate.4TreasuryDirect. Treasury Bonds
Treasury Inflation-Protected Securities (TIPS) adjust their principal up or down with the Consumer Price Index, so the investment keeps pace with inflation. TIPS come in 5-, 10-, and 30-year terms.5TreasuryDirect. TIPS2TreasuryDirect. Understanding Pricing and Interest Rates
Floating Rate Notes mature in two years and pay interest quarterly. The rate resets weekly based on the most recent 13-week T-bill auction.6TreasuryDirect. Floating Rate Notes (FRNs)
Savings Bonds
Series I bonds combine a fixed rate with an inflation rate that resets every six months, and they earn interest for up to 30 years.7TreasuryDirect. I Bonds They’re attractive when inflation runs high.
Series EE bonds earn a fixed rate and are guaranteed to double in value at 20 years. If accrued interest hasn’t reached that doubling point by year 20, the Treasury adds the difference. EE bonds keep earning interest for up to 30 years total.8TreasuryDirect. EE Bonds Held for the full 20 years, that doubling works out to an effective annual return of about 3.5%, regardless of the stated rate when you bought.
TreasuryDirect or a Brokerage
TreasuryDirect is the government’s own online portal. There are no fees, no middleman, and you can buy every security type the Treasury issues, including savings bonds (which brokers don’t offer). The trade-off is that TreasuryDirect doesn’t support secondary-market sales, so if you buy a 10-year note there and want out in year three, you first have to transfer it to a brokerage.
A brokerage account lets you buy marketable Treasuries on the secondary market alongside your other investments. You can search by CUSIP number or filter by maturity and yield. Prices move with interest rates, so you may pay above or below face value depending on when you buy. Treasury ETFs and mutual funds are another route: they trade like stocks and are easy to get in and out of, but they carry an expense ratio and their share prices fluctuate daily rather than returning face value at a set maturity.
Setting Up a TreasuryDirect Account
To open an individual account you need a valid Social Security Number, a U.S. address, a checking or savings account at a domestic bank with the routing and account numbers, and an email address.9TreasuryDirect. TreasuryDirect FAQ You must be at least 18 and legally competent. An Individual Taxpayer Identification Number won’t work for a personal account; the SSN requirement is firm.
You’ll pick an account type during registration: individual, entity, or fiduciary. Entity accounts for a trust, business, or estate require an Employer Identification Number (or SSN) plus a U.S. address and bank account in the entity’s name.10U.S. Department of the Treasury. Open an Account – Entity With your bank details ready, setup takes about ten minutes.
How Treasury Auctions Work for Individuals
The Treasury sells marketable securities through regular auctions, and retail buyers almost always use non-competitive bids. You agree to accept whatever rate the auction produces, and in return your purchase is guaranteed to fill. The cap on a non-competitive bid is $10 million per auction.11eCFR. 31 CFR 356.12 – What Are the Different Types of Bids and Do They Have Specific Requirements or Restrictions?
Competitive bids, where you specify the yield you’ll accept, are used by institutions and can’t be placed for securities held directly at the Treasury. Retail buyers on TreasuryDirect effectively don’t have that option; if you want to bid competitively you’d have to go through a broker.12eCFR. 31 CFR 356.12
Placing an Order on TreasuryDirect
Once your account is live, log in and open the BuyDirect tab. You’ll see every available security type. Pick one, enter the dollar amount, and choose an upcoming auction date.
Before you submit, a review screen shows the security type, amount, auction date, and linked bank account. You can also elect to reinvest the proceeds automatically at maturity, which is worth doing if you plan to stay in Treasuries long-term. After submitting, the purchase stays pending until the auction settles, and you get a confirmation number immediately.
Savings bonds are simpler because there’s no auction. Choose EE or I, enter your amount, and the bond is issued to your account at the current rate.
Minimums and Annual Limits
Marketable securities have a $100 minimum and must be bought in $100 increments, with that $10 million ceiling per non-competitive bid at each auction.13TreasuryDirect. Buying a Treasury Marketable Security
Savings bonds start at $25 and cap at $10,000 per type per calendar year, per Social Security Number.14TreasuryDirect. Buying Savings Bonds One person can buy up to $10,000 in electronic EE bonds and another $10,000 in electronic I bonds in the same year. Each family member with their own SSN has a separate allowance. Gift bonds count toward the recipient’s limit, not the buyer’s.15TreasuryDirect. How Much Can I Spend/Own? The option to buy paper I bonds with your tax refund ended January 1, 2025, so all savings bond purchases now happen electronically through TreasuryDirect.16TreasuryDirect. Using Your Income Tax Refund to Buy Paper Savings Bonds
Getting Your Money Back
Savings bonds cannot be cashed during the first 12 months. No exceptions.17TreasuryDirect. Cash EE or I Savings Bonds After a year you can redeem at any time, but cashing before the five-year mark forfeits the last three months of interest.18eCFR. 31 CFR 359.7 The redemption value never drops below what you originally paid. After five years there’s no penalty at all.
Marketable securities have no early redemption penalty because you can sell them on the secondary market whenever you want. The price depends on where interest rates have moved. If rates rose after you bought, you’ll likely sell at a loss; if rates fell, you’ll sell at a premium. TreasuryDirect itself doesn’t handle secondary-market sales, so selling early means transferring the security to a broker first.
How Treasury Interest Is Taxed
Interest on all Treasury securities is subject to federal income tax and exempt from state and local income tax. That exemption is set by federal statute and applies wherever you live.19Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation In high-tax states, that changes the after-tax math against corporate bonds and CDs.
Each January, TreasuryDirect or your brokerage issues a Form 1099-INT for the prior year’s interest.20TreasuryDirect. Tax Forms and Tax Withholding You report the amount on your federal return, using Schedule B if total interest income exceeds $1,500.21Internal Revenue Service. Topic No. 403, Interest Received
For Series EE and I bonds, you can report interest each year as it accrues or defer it until you cash the bond or it reaches final maturity. Most people defer. Just remember that cashing a bond that’s been earning for years means owing tax on the full accumulated amount in a single year.22TreasuryDirect. Tax Information for EE and I Bonds
Education Exclusion for Savings Bonds
If you use EE or I bond proceeds for qualified higher education expenses, you may be able to exclude the interest from federal tax entirely. For 2026, the exclusion begins phasing out when modified adjusted gross income exceeds $101,800 ($152,650 for married filing jointly) and disappears completely at $116,800 ($182,650 for married filing jointly). The bond must be registered in your name or jointly with your spouse, and you must have been at least 24 when the bond was issued. A child can be named as a beneficiary but not as a co-owner if you plan to use the exclusion.23TreasuryDirect. Registering Your Savings Bonds
Capital Gains on Secondary Market Sales
Sell a marketable Treasury on the secondary market for more than you paid and the profit is a capital gain. Hold for more than a year and it qualifies for long-term rates, which top out at 20% for most taxpayers. Sell within a year and the gain is taxed as ordinary income.24Internal Revenue Service. Topic No. 409, Capital Gains and Losses Losses work the same way in reverse and can offset other gains. Savings bonds redeemed through TreasuryDirect don’t produce capital gains, because you always receive the set redemption value rather than a market price.
Naming Beneficiaries on Savings Bonds
When you buy savings bonds, the registration you pick decides what happens to them if you die.23TreasuryDirect. Registering Your Savings Bonds
- Sole owner with a payable-on-death beneficiary. Only you control the bond while alive. On your death the named beneficiary automatically becomes the sole owner. The beneficiary must be a person, not an entity.
- Co-owned by two people. Either owner can manage the bond, and if one dies the survivor becomes sole owner automatically.
- Sole owner with no beneficiary. The bond becomes part of your estate and goes through whatever process your state requires.
Bonds registered with a beneficiary or co-owner pass directly to the survivor without probate, which is the main reason to make the designation at purchase rather than leaving it to the estate.