I bonds: how a Series I savings bond earns and pays
A Series I savings bond is a U.S. Treasury bond for individuals whose rate follows consumer prices. New bonds earn 4.26 % until October 31, 2026; the rules below decide what yours pays.
What your bond is worth
$11,324.00
Electronic Series I bond issued May 2023, value on October 1, 2026.
| Price paid | $10,000.00 |
| Interest earned | $1,324.00 |
| Rate in this period | 4.26 % |
| Three-month penalty already taken off | $120.00 |
| Final maturity (interest stops) | May 2053 |
Method of 31 CFR 351 and 359, checked against every Treasury redemption table published from 1999 to 2023.
| Month | Value | Interest | Cashable |
|---|---|---|---|
| Oct 2026 | $11,324.00 | $1,324.00 | yes, minus 3 months |
| Nov 2026 | $11,364.00 | $1,364.00 | yes, minus 3 months |
| Dec 2026 | $11,404.00 | $1,404.00 | yes, minus 3 months |
| Jan 2027 | $11,444.00 | $1,444.00 | yes, minus 3 months |
| Feb 2027 | $11,484.00 | $1,484.00 | yes, minus 3 months |
Worked out by Radif Partners · How we calculate · rates read on treasurydirect.gov and fiscaldata.treasury.gov · not personal financial advice
An I bond is an electronic savings bond sold by the Treasury in TreasuryDirect, from $25 to $10,000 per person each calendar year, to the cent. It earns a composite rate made of a fixed rate, kept for 30 years, and an inflation rate reset every six months from the CPI-U; bonds bought from May to October 2026 earn 4.26 %, with a fixed rate of 0.90 %. Interest is added to the bond on the first of each month and compounds every six months. You cannot cash it during the first 12 months, and before five years you lose the last three months of interest. Interest is subject to federal income tax but not to state or local tax, and you can report it when you cash the bond. For example, $10,000 put into an I bond in May 2023 is worth $11,324.00 on the first of October 2026, after a penalty of $120.00 that disappears in May 2028.
Where the rate comes from
The I bond rate is two numbers combined. The fixed rate is set by the Treasury for each six-month sales window and stays with the bond for 30 years. The inflation rate is computed from the consumer price index twice a year and applies to every I bond, each on its own six-month schedule. The I bond rates page shows the current figures and the rate of any bond; the fixed rate history lists every window since 1998.
The bond bought in May 2023 in the example above has a fixed rate of 0.90 %. It has been through 7 rate periods so far, at 4.30 %, 4.86 %, 3.87 %, 2.81 %, 3.77 %, 4.03 %, 4.26 %. Each six-month period starts in May or November because the bond was issued in May.
Value of an I bond you own
What your bond is worth
$5,890.00
| Price paid | $5,000.00 |
| Interest earned | $890.00 |
| Rate in this period | 3.34 % |
| Three-month penalty already taken off | $46.00 |
Buying and holding
New I bonds exist only as electronic bonds in TreasuryDirect, the Treasury's own website (TreasuryDirect, I bonds). You can buy any amount from $25 to the cent, up to $10,000 per calendar year for each Social Security number; the purchase limit page explains how children, gifts and trusts add room. A bond can be registered to one owner, to two co-owners, or to an owner with a beneficiary. Every purchase is dated the first day of the month it is paid, and interest runs from that date.
Paper I bonds were sold at face value, at banks and through payroll plans until 2012 and with tax refunds until the end of 2024. They follow the same rates. A $50 paper bond from August 2001, with its fixed rate of 3.00 %, is worth $201.56 this month.
Cashing an I bond
For the first 12 months the bond cannot be cashed at all, except in rare cases of a declared disaster. From month 13 to the fifth anniversary, the Treasury pays the value minus the last 3 months of interest. After five years it pays the full value. An electronic bond can be cashed in part, for any amount of at least $25 as long as $25 remains; the money goes to the linked bank account in a few business days. A paper I bond has to be cashed whole, at a bank that offers the service or by mail to the Treasury. The early cashing calculator prices the penalty in dollars, and the cashing page covers the paperwork.
Tax on I bond interest
Interest is taxed by the IRS as ordinary income and is exempt from state and local income tax (31 U.S.C. 3124). Most owners report it once, in the year the bond is cashed or reaches final maturity, using the Form 1099-INT the Treasury issues. You can instead report the increase in value every year. In the 22 % federal bracket, $1,000 of I bond interest costs $220 of federal tax and nothing at the state level. Interest used for college tuition can be excluded under the income limits of Form 8815: see savings bonds for education. The tax page covers the methods in detail.
What the fixed rate means over 30 years
Because the inflation part only matches the rise in prices, the fixed rate is what an I bond earns above inflation. A bond with a fixed rate of 0.90 % grows by roughly that much a year in purchasing power, before federal tax, for as long as it is held, up to 30 years. A bond with a fixed rate of zero keeps its purchasing power and no more. The rate at which a bond was bought is therefore the main difference between two I bonds held for a long time, while the six-month inflation figures in the news matter mostly to someone holding for a year or two. Interest that is reported only when the bond is cashed also defers the federal tax for as long as the bond is kept.
I bonds next to EE bonds and T-bills
EE bonds, the other savings bond the Treasury sells, pay a fixed rate of 2.40 % for bonds bought from May to October 2026 and double in value at 20 years; the comparison page runs both side by side. Treasury bills pay a market rate set at auction, mature in four to 52 weeks and have no penalty, but they reinvest at whatever the next auction pays. Their rates are on the T-bill rates page.