I-Bond Calculator 2026: Current Rate, Purchase Limits, and When to Redeem

Series I Savings Bonds (I-Bonds) are US government bonds with yields that adjust for inflation every 6 months. They cannot lose value, are guaranteed by the federal government, and interest is state-tax-free.

The trade-off: you can only buy $10,000 per person per year, and the money is locked up for one year (with a 3-month interest penalty if redeemed before 5 years).

How I-Bond Interest Rates Work

The I-Bond rate has two components:

| Component | 2026 Value | What It Does | |-----------|------------|--------------| | Fixed rate | 1.20% | Permanent for the life of the bond | | Inflation rate | 1.66% (semi-annual) = 3.34% annualized | Changes every May and November based on CPI | | Composite rate | ~2.86% (current period) | Total rate earned, recalculated every 6 months |

The composite formula: = Fixed Rate + (2 × Inflation Rate) + (Fixed Rate × Inflation Rate)

When inflation is high (as in 2021-2022 when I-Bonds paid 9.62%), I-Bonds outperform nearly all savings alternatives. When inflation is low, the yield may trail HYSAs and CDs.

I-Bond Purchase Limits (2026)

| Method | Annual Limit | |--------|-------------| | TreasuryDirect (per person) | $10,000 | | Paper bonds via tax refund | $5,000 | | Maximum per individual | $15,000 | | Married couple (joint) | $30,000 | | Trust or LLC | $10,000 additional |

You cannot buy I-Bonds through a broker. Only TreasuryDirect.gov for electronic purchases, and via IRS Form 8888 for paper bonds using your tax refund.

I-Bond Timeline: Locking Up and Getting Out

| Holding Period | Rules | |---------------|-------| | 0-11 months | Cannot redeem at all | | 12-59 months | Can redeem, but lose last 3 months of interest (penalty) | | 60+ months (5 years) | Redeem anytime, no penalty | | 30 years | Bond stops earning interest (maximum hold) |

The 3-month penalty calculated:

$10,000 I-Bond, composite rate 2.86%, redeemed at month 24:

• Earned: 24 months × (2.86% / 12) = $476.60
• Penalty: 3 months × (2.86% / 12) = $71.50
• Net received: $405.10 in interest + $10,000 principal

At 60+ months, no penalty applies.

I-Bond Tax Treatment

| Tax | Treatment | |-----|-----------| | Federal income tax | Owed when redeemed (you choose when) | | State/local income tax | Exempt | | Capital gains | Not applicable | | Estate/inheritance | Subject to federal estate tax |

The tax deferral is valuable. You control when you owe federal income tax — you can redeem in a low-income year (gap year, early retirement) to minimize the tax hit. No federal tax until redemption.

Education tax exclusion: If you redeem I-Bonds and use the proceeds for qualified higher education expenses in the same year, the interest may be entirely federal-tax-free. Income limits apply (phased out above ~$113,000 single / $168,000 married in 2026).

I-Bond vs. HYSA vs. Treasury Bills (2026 Comparison)

| Option | Current Rate | Tax | Liquidity | Risk | |--------|-------------|-----|-----------|------| | I-Bond | 2.86% | Federal deferred, no state | Locked 1 year | None | | HYSA | 4.50-5.00% | Fully taxable annually | Instant | None (FDIC) | | 1-year Treasury | 4.60% | State-exempt, federal taxable | Annual maturity | None | | 5-year CD | 4.20% | Fully taxable | Penalty before 5 yr | None (FDIC) |

In the current rate environment (2026), HYSAs and Treasuries offer higher nominal yields than I-Bonds. I-Bonds shine when inflation spikes above the HYSA/Treasury yield — as happened in 2021-2022. Their role in a portfolio is inflation insurance, not maximizing current yield.

When I-Bonds Make Sense

Strong case:

• Inflation is rising or expected to rise above current HYSA rates
• You have maxed tax-advantaged accounts and want a risk-free savings vehicle
• You want state-tax-free interest (states with income tax benefit more)
• You have a 5+ year time horizon for idle savings

Weak case:

• You need liquidity in the next 12 months
• Current inflation-adjusted yield is below HYSA or CD rates
• You need to save more than $10,000-$15,000 per year

Frequently Asked Questions

Can I buy I-Bonds as a gift for someone else?

Yes. You can purchase I-Bonds as gifts and hold them in a gift box within TreasuryDirect until delivered. The gift counts against the recipient's $10,000 annual limit, not yours. This allows a couple to effectively double their annual I-Bond purchase by pre-buying the following year's allocation as gifts.

What is the best month to buy I-Bonds?

The rate resets every May 1 and November 1. To maximize your first year's return, buy in April (locking in the current rate for 6 months) or October (same logic). Buying the day before a rate reset allows you to benefit from a higher rate if inflation is declining. Track the CPI announcement in April and October to anticipate the next rate change.

How do I redeem I-Bonds?

Log in to TreasuryDirect.gov, select the bond, and request redemption. Proceeds are deposited directly to your bank account within one business day. The accrued interest shows up on a 1099-INT for the redemption year.