I Savings Bonds FAQs
- How is the earnings rate of an I Bond determined?
- What is the difference between EE and I Bonds?
- Are there tax benefits to using I Bonds to finance education?
- Can I give an I Bond as a gift?
- Can I ever lose money in I Bonds?
- How are lost, stolen, or destroyed paper I Bonds replaced?
- When are earnings added to the I Bond?
- Where can I Bonds be redeemed?
- When can I cash (redeem) an I Bond if I need the money?
- Can EE/E Bonds be exchanged for I Bonds?
- What are Gulf Coast Recovery Bonds?
- I noticed savings bonds are being sold through auction sites such as eBay™, but I thought ownership was non-transferable. How does this work?
How is the earnings rate of an I Bond determined?
The earnings rate combines two separate rates:
- A fixed rate of return, which remains the same throughout the life of the I Bond.
- A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Public Debt announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September.
What is the difference between EE and I Bonds?
The biggest difference is the rate you receive on your bonds. Rates for EE Bonds depend on the issue date and are either a fixed rate of return or a variable rate based on 90% of 6-month averages of 5-year Treasury Securities yields, while rates for I Bonds are calculated by combining fixed rates of return and semi-annual inflation rates based on the CPI-U.
Are there tax benefits to using I Bonds to finance education?
Yes. Under the Education Savings Bond Program you might be able to completely or partially exclude savings bond interest from Federal income tax. This can occur when you pay qualified higher education expenses at an eligible institution or state tuition plan in the same calendar year you redeem eligible I Bonds and EE Bonds issued January 1990 and later. You aren't required to indicate that you intend to use the bonds for educational purposes when you buy them, but you must make sure the program's requirements are met; some apply when you buy the bond(s). See IRS Publication 970 " Tax Benefits for Education."
Can I give an I Bond as a gift?
Electronic Bonds as gifts
You can purchase an electronic I Bond as a gift for someone and hold it in the "Gift Box" in your TreasuryDirect account until you are ready to transfer it to the recipient.
When you buy savings bonds as gifts, you must hold them in your TreasuryDirect account for at least five business days before you can deliver them to the gift recipient. The five-day hold protects Treasury against loss by ensuring the ACH debit has been successfully completed before the funds can be moved.
If you purchase an electronic I Bond as a gift, you must provide the recipient's Social Security Number. The gift recipient must open or already have a TreasuryDirect account in order for you to be able to transfer the bond to that person. However, if the recipient has not opened a TreasuryDirect account, you may hold an EE or I Bond that you purchased as a gift until it reaches maturity.
Paper I Bonds as gifts purchased with your IRS tax refund
I Bonds are great gifts for all occasions. Using your tax refund, an I Bond can be sent to you so you can present it personally to the recipient. When you buy the I Bond, download a gift certificate. The word "gift" won't appear on the I Bond.
If you're buying an I Bond for a gift and you don't have the Social Security Number of the person you're buying the bond for, simply use your number. Even though your number will be printed on the bond, you'll incur no tax liability, and it won't count towards your annual purchase limit. The Social Security Number is used for tracking purposes only, such as in cases where the savings bond is lost, stolen, or destroyed.
Can I ever lose money in I Bonds?
No. They are U.S. Treasury securities backed by the U.S. Government. I Bonds even protect you from the effects of severe deflation—the earnings rate can't go below zero and the redemption value of your I Bonds can't decline.
How are lost, stolen, or destroyed paper I Bonds replaced?
The Bureau of the Public Debt is authorized to replace lost, stolen, or destroyed I Bonds. You can file a claim by writing to: Bureau of the Public Debt, Parkersburg, West Virginia 26106-7012. You'll need to complete Form PDF 1048.
Keep records of your I Bond serial numbers, issue dates, and the social security or taxpayer identification numbers in a safe place. This information will help speed up the replacement process.
If you hold electronic I bonds in your TreasuryDirect account, there is no paper to lose or have stolen or destroyed.
When are earnings added to the I Bond?
I Bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I Bond's issue date. An I Bond's issue date is the month and year in which an I Bond issuing agent receives the full issue price.
Where can I Bonds be redeemed?
If you own electronic I Bonds, you can redeem them in the TreasuryDirect application. Most financial institutions serve as paying agents for paper I Bonds and Series EE Bonds. If they redeem Series EE Bonds, they also redeem I Bonds.
When can I cash (redeem) an I Bond if I need the money?
You can cash your Series I bonds anytime after 12 months. You receive the original purchase price plus interest earnings. I Bonds are meant to be longer-term investments; if you redeem an I Bond within the first 5 years, you'll lose your last 3 months interest. For example, if you redeem an I Bond after 18 months, you'll receive the first 15 months of interest.
Can EE/E Bonds be exchanged for I Bonds?
No, but you can cash the EE/E Bonds and use the proceeds to buy I Bonds. The interest earned on the EE/E Bonds must be reported on your Federal income tax return for the year in which they were cashed.
What are Gulf Coast Recovery Bonds?
Gulf Coast recovery bonds were issued March 29, 2006-September 30, 2007. This special I Bond designation was to encourage continued public support for recovery efforts in the region severely damaged by hurricanes. The Gulf Opportunity Zone Act of 2005 contained a provision encouraging Treasury to make this designation. The proceeds from the sales of savings bonds were not earmarked for specific purposes but went into Treasury’s general fund and spent according to appropriations, including those for Gulf Coast recovery, passed by Congress and signed into law by the President.
I noticed savings bonds are being sold through auction sites such as eBay™, but I thought ownership was non-transferable. How does this work?
Savings bonds are sometimes sold as souvenirs or collectors' items. The sale doesn't affect the ownership of the savings bond, since by regulation, a savings bond is a registered security and ownership is non-transferable. The United States Treasury still has a contractual relationship with the owner or co-owners named on the bond, not the person who bought the bond at auction. Because of this, the person buying it at auction can't cash it--he's just purchased a piece of paper showing a bond that still is the property of the owner or co-owners named on the bond. In some cases, the bond may be the property of the United States Treasury, if it's a bond that was lost and has since been replaced. Bottom line: it's not a good idea to buy a savings bond at an auction, because you do not acquire any title to the bond or have any ownership rights.