I bonds explained: the rate formula, purchase limits and cash-out rules

Series I savings bonds are the US Treasury's inflation-linked savings product for households: you lend the government as little as $25, and the rate you earn moves with consumer prices. I bonds bought from November 1, 2026 to April 30, 2027 earn 5.51% for their first six months, made of a 1.40% fixed rate that lasts for the life of the bond and an inflation rate of 2.04% for six months (4.08% annualized). The trade-offs are a yearly purchase cap, a one-year lockup and a penalty for leaving early. Below are the formula, the reset calendar, a $10,000 example, the limits and the tax rules. For the other securities the government sells, start at the Treasuries hub.

What is a Series I savings bond?

A Series I savings bond is a Treasury security that pays a fixed rate plus an inflation rate and is sold only electronically through TreasuryDirect.

Unlike a Treasury note or TIPS, an I bond is non-marketable. It cannot be sold to another investor or traded on an exchange, so its value never falls when market interest rates rise. You hold it and earn interest, or you cash it in with the Treasury at a value set by formula. Interest is added to the bond every month, compounds twice a year and is paid only when you redeem. After 30 years the bond reaches final maturity and stops earning.

Purchases start at $25 and can be any amount above that to the penny, so $1,234.56 is a valid order. I bonds carry the same full faith and credit backing as every other Treasury security. That backing covers repayment, not the rate: the composite can fall as low as zero, the money is locked up for a year, and federal tax applies when you cash out.

The first I bonds were issued in September 1998 with a 3.40% fixed rate, so the oldest ones reach their 30-year limit in September 2028.

How is the I bond rate calculated?

The composite rate adds the fixed rate, twice the six-month inflation rate, and a small cross term that applies the fixed rate to the inflation gain.

Each input follows its own rules:

• Fixed rate. Treasury announces it every May 1 and November 1, and it applies for the life of every bond issued in the next six months. It has ranged from 0.00%, for bonds issued from May 2020 to October 2022, to 3.60% for bonds issued from May to October 2000.
• Semiannual inflation rate. This is the percentage change in the CPI-U, the Bureau of Labor Statistics index for all urban consumers, not seasonally adjusted, over six months: September to March for the rate announced May 1, and March to September for the rate announced November 1. One inflation rate applies to every I bond ever issued.
• Composite rate. It is an annual rate rounded to two decimals, and a bond earns half of it in each six-month period.

Two floors protect the owner. The composite rate cannot go below zero, even when prices fall by more than the fixed rate can offset, and a bond's redemption value never declines from one month to the next. The floor has been used: the inflation rate announced on May 1, 2015 was −0.80% for six months, so every bond with a fixed rate of 1.60% or lower earned 0.00% for its next six-month period, while older bonds with higher fixed rates still earned a little. In the other direction, the 4.81% semiannual inflation rate announced on May 1, 2022 gave bonds with a 0.00% fixed rate a composite of 9.62%.

When does an I bond's rate change?

An I bond's rate changes every six months, counted from the bond's own issue month, so different bonds reset in different months.

The issue date is the first day of the month in which the purchase is made. A bond bought on November 24, 2026 is dated November 1 and earns interest for all of November. That bond's rate changes on May 1 and November 1 every year. A bond issued in February resets each August and February, one issued in July resets each January and July, and so on through the calendar.

The announcement and the reset are separate events. Treasury publishes a new inflation rate on May 1 and November 1, but each bond picks it up at the start of its next six-month period. A bond issued in July 2026, for example, kept the May 2026 rate through December 2026 and switches to the November 2026 inflation rate in January 2027. The November 2026 I bond rate update covers the latest announcement.

For bonds bought from November 2026 to April 2027, the first six months are locked at 5.51%. The next rate will combine the permanent 1.40% fixed rate with the inflation rate announced on May 1, 2027, which compares the March 2027 CPI-U with the September 2026 level. Treasury has not set that rate, but the arithmetic is fixed:

These rows are arithmetic, not a forecast. The live table below lists the latest monthly CPI-U readings. Compare the newest index level with the September 2026 row to see how far prices have moved since the current rate was set; the March 2027 figure, published in April 2027, is the one that counts.

How much would $10,000 of I bonds bought in November 2026 earn?

At the 5.51% composite rate, $10,000 of I bonds bought in November 2026 grows to about $10,276 by May 1, 2027, before tax.

Two patterns stand out. Monthly accruals make the calendar matter, because cashing on November 30 instead of December 1 gives up a full month of interest. And the penalty bites hardest early on: at 12 months it removes about a quarter of everything earned, while at 59 months it removes about a twentieth. The compound interest calculator projects longer holding periods if you set semiannual compounding and pick an assumed composite rate, and the compound interest guide explains the growth math.

How many I bonds can you buy each year?

The cap is $10,000 in electronic I bonds per person per calendar year, tracked by the owner's Social Security number.

The limit applies to bonds issued to you in a calendar year, no matter who pays. A few rules let a household buy more:

• Gifts count in the year they are delivered. You can buy an I bond as a gift in your own account and deliver it to the recipient's TreasuryDirect account later, no sooner than five business days after purchase. It counts toward the recipient's limit in the year of delivery.
• Each person has a separate limit. Spouses each get $10,000, and a child with a minor linked account has a separate $10,000 limit.
• Entities have their own limit. A trust, estate or business with its own taxpayer identification number can buy $10,000 a year through an entity account.
• EE bonds have a separate cap. The same person can also buy $10,000 of Series EE bonds each calendar year.

There is no limit on how much you can hold in total, only on how much can be issued to you each year. Paper I bonds, which could once be bought with part of a federal tax refund, are gone: that option ended on January 1, 2025, so new purchases are electronic only.

When can you cash an I bond, and what does it cost?

Both timing rules count from the issue date. Not cashable for 12 months; cashing before 5 years forfeits the last 3 months of interest.

The penalty is measured in your own bond's interest, so its dollar cost depends on the rate in force during those last three months. In the $10,000 example above, cashing at exactly 12 months would cost about $88 if the May 2027 rate were 3.41% and about $167 at 6.44%. The penalty never pushes the payout below the purchase price, and after five years it no longer applies.

Other rules that affect timing:

• Partial cashing. Electronic bonds can be cashed in part, in amounts of $25 or more, as long as at least $25 remains in the bond.
• Monthly steps. Values change on the first day of each month, so a redemption on the 28th pays the same as one on the 1st.
• Disaster waiver. Treasury waives the 12-month minimum for owners in areas with an official disaster declaration; TreasuryDirect's disaster page explains the process.
• Low fixed rates. A bond bought from May 2020 to October 2022 has a 0.00% fixed rate, so once the November 2026 inflation rate reaches it, it earns 4.08% while a new bond earns 5.51%. Cashing an old bond after its five-year mark and buying a new one raises the rate, but it triggers federal tax on all the deferred interest and uses part of that year's $10,000 limit.

The savings bond cashing guide walks through redemption in TreasuryDirect, the best time of month to cash and the paperwork for older paper bonds.

How are I bonds taxed?

I bond interest is taxed federally but not by states or cities, and most owners report it only when they cash the bond.

IRS Publication 550 allows two reporting methods:

• Defer, the default. Report all the interest in the year you cash the bond or it reaches final maturity, whichever comes first.
• Report yearly. Include each year's increase in value as income. You can switch to yearly reporting without IRS permission, but it then applies to all your Series EE and I bonds, and switching back requires a statement to the IRS under its automatic-consent procedure.

Yearly reporting is sometimes used for a child with little other income, whose interest may fall below the filing threshold. The 1099-INT for an electronic bond appears in your TreasuryDirect account in January of the year after you cash it. The T-bill tax guide covers the state exemption and the 1099-INT in more detail.

Interest can be tax-free when it pays for higher education. For 2026, the exclusion phases out between $101,800 and $116,800 of modified adjusted gross income ($152,650 and $182,650 for married couples filing jointly). The main conditions:

• You were at least 24 years old before the bond's issue date, and the bond is in your name or in your and your spouse's names. A bond registered to a child does not qualify.
• Married couples must file jointly.
• The money pays qualified expenses in the same year you cash the bond: tuition and required fees for you, your spouse or a dependent at an eligible school, or a contribution to a 529 plan or Coverdell education savings account. Room, board and books do not count.
• You claim the exclusion on Form 8815 and keep records of the bonds and the bills.

If the amount you cash exceeds your qualified expenses, only part of the interest is excluded. Cash $10,000 of bonds that include $2,000 of interest, pay $8,000 of tuition, and you can exclude 80% of the interest, or $1,600. Tax rules change, so check the current IRS figures or ask a tax professional before counting on the exclusion.

How do you buy I bonds?

You buy I bonds in a TreasuryDirect account; banks, brokers and fund companies do not sell them.

To sign in you need an ID.me account, the only way to sign in since October 28, 2026; setting one up takes your Social Security number and a government-issued photo ID. Once inside, a purchase takes a few minutes:

1. Open the BuyDirect tab and choose Series I savings bonds.
2. Pick the registration: yourself alone, yourself with a second owner or a beneficiary, or a gift for someone else, which needs that person's name and Social Security number.
3. Enter an amount of $25 or more, to the penny, a purchase date and the linked bank account that will pay. Repeat purchases can be scheduled.
4. Submit and check the confirmation. Purchases are generally issued to your account within one business day.

Account setup, sign-in problems and linked accounts for children are covered in the TreasuryDirect account guide.

How do I bonds compare with TIPS, T-bills and EE bonds?

I bonds offer inflation protection without price risk, at the cost of a purchase cap, a one-year lockup and a lower real rate than TIPS today.

On October 30, 2026 the 5-year TIPS yielded 2.25% above inflation, against the I bond's 1.40%, and the 52-week bill paid a 4.36% investment yield fixed for the year. The I bonds vs TIPS comparison and the I bonds vs T-bills comparison run those trade-offs through different inflation paths, and the EE bonds guide shows what the doubling promise is worth. To compare any yield yourself, use the real returns guide, today's T-bill rates and the Treasury bill calculator.

What are the risks and downsides of I bonds?

The main risk is that inflation cools: the composite rate falls with it, while the money stays locked for at least a year.

• Falling rate. If six-month inflation slowed to 0.50%, a November 2026 bond would earn about 2.41% from May 2027, well below the yields Treasury bills offered on October 30, 2026.
• Low real rate. The 1.40% fixed rate is below TIPS real yields, so over a long holding period an I bond can trail a TIPS held to maturity by roughly 0.85 to 1.2 percentage points a year in purchasing power.
• Illiquidity. Nothing can be cashed for 12 months, and early exits cost three months of interest until year five.
• Purchase cap. At $10,000 per person per year, I bonds can cover only part of a larger cash reserve.
• One platform. I bonds live only in TreasuryDirect. You cannot move them to a broker, and account problems are handled by the TreasuryDirect contact center or by mail.
• Your inflation is not the CPI-U. The index tracks an average urban basket. If your own costs, such as rent or insurance, rise faster, the bond will not keep pace with them.
• Tax bunching. Deferring for decades puts all the interest into one tax year, possibly at a higher bracket than if it had been spread out.

The US government's backing makes default risk remote, but it does not fix the rate or shorten the lockup; the guide to whether Treasuries are risk-free covers the risks that backing leaves in place. The figures on this page are worked examples, not forecasts of future rates.