The interest rate on US Treasury Series I Savings Bonds are comprised of two components: fixed rate and variable inflation rate. Both components are redetermined every six months by the US Treasury and apply to I Bonds purchased/issued during that six-month period. The fixed interest rate component, as the name suggests, is fixed and will not change over the life of a bond. In contrast, the variable inflation rate component will change every six months as inflation changes. For example, I Bonds purchased in April 2022 had a fixed rate of 0% and an inflation rate of 7.12%. Over the next 30 years, the fixed rate will remain 0% although the inflation rate of 7.12% will change every six months.
I Bonds earn interest for 30 years unless you cash them first. You can cash them after one year, but if you cash them before five years, you lose the previous three months of interest. For example, if you cash an I Bonds after 18 months, you only get the first 15 months of interest.
Interest On I Bonds
Interest on I Bonds is subject to federal income tax, but not state and local income tax. You can report the interest every year or put off (defer) reporting the interest until you file a federal income tax return for the year in which the first of these events occurs:
- You cash the bond and receive what the bond is worth, including the interest
- You give up ownership of the bond and the bond is reissued
- The bond stops earning interest because it has reached final maturity
Buying I Bonds
You can’t walk into a bank anymore and buy treasury savings bonds. To buy I Bonds you have to set up an account at TreasuryDirect.gov.
You can buy up to $10,000 per calendar year, and up to an additional $5,000 in paper I Bonds if you have a tax refund coming when you file your federal income tax return. You’d need to complete IRS Form 8888 and include it when you file your tax return.