The two most common types of savings bonds are I Bonds and Series EE Savings Bonds. Both are accrual securities, meaning the interest you earn accrues monthly at a variable rate and the interest is compounded semiannually. You receive your interest income when you redeem the bonds.
The I Bond tracks inflation to prevent your earnings from being eroded by a rising cost of living. Series EE Savings Bonds issued after May 2005 earn a fixed rate of interest. Both types of bonds are exempt from all state and local income taxes.
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| What are Patriot Bonds? Think of them as flag-waving Series EE bonds. Patriot Bonds were first issued December 11, 2001. These special Series EE savings bonds are inscribed with the special "Patriot Bond" inscriptionFor more information on Patriot Bonds, see the Treasury Department's Patriot Bond FAQs Web page. |
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The chart below outlines the major differences between EE and I bonds.
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EE Bond |
I Bond |
| Features |
Electronic bonds issued/sold at face value (a $100 electronically sold EE Bond costs $100); paper bonds issued/sold in paper at 50% of face value (a $100 EE Bond costs $50) |
Same as EE |
| Electronic bonds can be bought in amounts of $25 or more, to the penny. Paper bonds are offered in eight denominations ($50, $75, $100, $200, $500, $1,000, $5,000 and $10,000) |
Offered in seven denominations ($50, $75, $100, $200, $500, $1,000 and $5,000 |
| $5,000 maximum purchase in one calendar year per Social Security Number |
Same as EE |
| Interest |
Bonds issued after May 2005 earn a fixed rate of return. Variable rates for bonds bought from May 1997 through April 2005 are calculated as 90% of 6-month averages of 5-year Treasury Securities yields |
Calculated in a formula using a fixed rate of return and a semiannual inflation rate based on CPI-U |
| Rates announced every May 1 and November 1 |
Rate Announcement: Same as EE |
| Paper bonds are guaranteed to reach face value in 20 years |
No guaranteed level of earnings |
| Bond increases in value monthly due to interest, which compounds semiannually; interest is paid when the bond is redeemed. |
Generally increases in value monthly and interest compounds semiannually (except in periods of deflation when the bond value could remain unchanged); interest is paid when the bond is redeemed |
| Earn interest for up to 30 years |
Life span: Same as EE |
| Cashing |
Can be cashed any time after 12 months |
Same as EE |
| A 3-month interest penalty applies to bonds redeemed during the first 5 years |
Same as EE |
| Financial institution reports interest earnings (difference between redemption value and purchase price) on IRS form 1099-INT; savings bonds are exempt from state and local income taxes |
Same as EE |
| Eligible for tax benefits upon redemption when used for qualified education expenses |
Same as EE |
| Source: TreasuryDirect publication "I and EE Savings Bond Comparison" |
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| H is for Last Hurrah Investors used to be able to convert their unredeemed Series EE bonds to HH bonds, deferring taxation of interest until the HH bonds matured and were redeemed, often decades down the road. The Bureau of Public Debt announced that Series HH bonds would no longer be offered to the public after August 31, 2004. Holders of eligible E bonds may choose to invest proceeds of maturing issues in new series EE or I bonds, or other savings vehicles. |
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