US savings bonds promise three things no savings account does: exemption from state income tax, federal tax deferred until redemption, and a rate the market cannot claw back. They charge for it with a 12-month lockup and a three-month interest penalty on anything redeemed inside five years. This calculator prices both sides: the value of a Series I bond at its current 4.26 percent composite rate or a Series EE bond at 2.40 percent with its 20-year doubling guarantee, the penalty if you quit early, the federal tax at your marginal rate, and the after-tax comparison against a taxable savings account earning the same kind of APY.
A savings bond is a strange little instrument: you lend the federal government money for up to 30 years, accept a below-market rate in exchange for a tax package you cannot get anywhere else, and forfeit three months of interest if you change your mind too soon. Most calculators stop at the balance. This one answers the question that actually decides the purchase, whether the bond's tax deferral and state exemption beat an ordinary taxable savings account after the penalty rules are priced in.
The comparison matters because the numbers are closer than the marketing suggests. At the defaults, a $10,000 I bond held five years nets $11,783.11 after federal tax, while the same $10,000 in a 4.00 percent APY savings account taxed annually at 24 percent nets $11,615.27. The bond wins by $167.84, real money, but hardly the windfall implied by the headline rate. Where the bond genuinely pulls ahead is the long hold: at 20 years the deferral advantage grows to $1,856.31, and the EE bond's contractual doubling turns a 2.40 percent rate into an implied 3.51 percent. Where it falls behind is the short hold, which the penalty table below makes plain.
Variables in plain terms. P is the purchase amount, $10,000 at the defaults, which is also the annual electronic purchase limit per Social Security number for each series. r is the composite annual rate, 4.26 percent for I bonds issued May through October 2026, 2.40 percent for EE bonds from the same window. Savings bonds earn interest monthly but compound semiannually, so the model applies r/2 every six full months and accrues the leftover months straight-line, the same convention TreasuryDirect's tables follow. The tax line treats the whole accumulated interest as ordinary income in the redemption year, the standard deferral election. The comparison account is a savings account or CD whose APY is taxed away annually at your federal marginal rate, which is how interest-bearing deposit accounts actually work; state income tax on the savings side is ignored, so the comparison is conservative in the bond's favor.
Buy a $10,000 Series I bond at the current 4.26 percent composite rate and hold it exactly five years. Semiannual compounding at 2.13 percent per period produces a redemption value of $12,346.20, of which $2,346.20 is interest. Cashing in at the five-year mark means no penalty, but the IRS finally sees what the bond deferred: $563.09 at a 24 percent marginal rate, leaving $11,783.11. The same $10,000 left in a 4.00 percent APY savings account, taxed each year at the same 24 percent, grows to $11,615.27. The bond's after-tax advantage is $167.84.
| Result at the defaults | Amount |
|---|---|
| Bond value at 5 years (4.26% composite, semiannual compounding) | $12,346.20 |
| Interest earned | $2,346.20 |
| Early redemption penalty | $0 |
| Federal tax at 24% (deferred, paid at redemption) | −$563.09 |
| After-tax bond net | $11,783.11 |
| Taxable savings account at 4.00% APY, taxed annually | $11,615.27 |
| Deferral advantage | $167.84 |
Run the same bond across different holding periods and the shape of the product appears. Inside five years, every redemption is discounted by the last three months of interest; after five years the discount vanishes and the compounding is fully yours. The deferral advantage flips from negative to positive around year four, because three years of penalties cost more than five years of tax deferral earns back.
| Years held | Penalty | After-tax net | Taxable account | Advantage |
|---|---|---|---|---|
| 1 | −$108.77 | $10,244.54 | $10,304.00 | −$59.46 |
| 3 | −$118.34 | $10,934.56 | $10,940.01 | −$5.45 |
| 5 | $0 | $11,783.11 | $11,615.27 | $167.84 |
| 10 | $0 | $13,984.58 | $13,491.45 | $493.13 |
| 20 | $0 | $20,058.22 | $18,201.91 | $1,856.31 |
Read the table honestly and the product's intended audience is clear. A bond redeemed at one year is simply worse than the savings account, by $59.46 at these defaults, because the penalty lands on interest you barely earned. The bond is a vehicle for money you can genuinely park: an emergency reserve's second layer, a grandchild's education fund, or the inflation-indexed slice of a savings plan. For money that might be needed within three years, the CD interest calculator prices the no-penalty alternative, and the savings goal calculator sizes how much actually belongs in the illiquid tier.
Choosing between the two series is a bet on inflation. The EE bond locks 2.40 percent for 20 years but contractually doubles at that anniversary, a guaranteed floor worth an implied 3.51 percent compound return whether inflation runs hot or cold; without the guarantee, $10,000 at 2.40 percent compounds to only $16,114.64 in 20 years, and the Treasury makes up the $3,885.36 difference. The I bond starts higher at 4.26 percent and adjusts every six months to CPI-U, with a floor at zero, so it wins if inflation stays elevated and disappoints if it collapses. At the defaults the I bond held 20 years reaches $23,234.50 before tax, ahead of the EE bond's guaranteed $20,000, but the I bond's future rates are unknowable while the EE guarantee is printed in the regulations. One way to split the difference is the annual limit itself: $10,000 of each series per Social Security number is allowed, so a household can hold both bets. For the long-horizon side of the same decision, the compound interest calculator shows what the same money does outside the bond wrapper, and the inflation calculator converts the I bond's real promise, a rate indexed to CPI-U, into purchasing-power terms.
Two rules apply per TreasuryDirect. First, you cannot redeem at all during the first 12 months; the bond is locked. Second, if you redeem between 12 months and 5 years, you lose the last three months of interest. The arithmetic is simple once you see it: cash in after 18 months and you are paid the first 15 months of interest only, which is TreasuryDirect's own example. At this page's defaults, a $10,000 I bond bought at the 4.26% composite rate and redeemed at 59 months gives up $128.74 of interest for the privilege of quitting three months early, and redeeming at one year gives up $108.77. The calculator applies the penalty by valuing the bond three months before your redemption date. After the five-year mark the penalty disappears entirely, which is why the results jump between the four-year and five-year rows of the holding-period table.
State and local income tax: fully exempt, for both EE and I bonds, in every state. That is a real advantage in high-tax states where a 4 percent savings account yield is reduced further by state tax that this calculator does not even model. Federal income tax: yes, but you choose the timing. The default is deferral, all interest reported in the year the bond stops earning interest or the year you cash it, whichever comes first, and at redemption the entire accumulated interest is taxed as ordinary income. You may instead elect to report interest annually, which sacrifices the deferral but can make sense for a child's bond with little other income. One more federal break exists: the education exclusion can eliminate federal tax on I bond or EE bond interest issued 1990 or later when proceeds pay qualified higher education expenses, subject to modified adjusted gross income limits that TreasuryDirect publishes each year. This calculator prices the standard deferral case at your marginal rate.
Because of a guarantee that overrides the arithmetic. EE bonds issued since May 2005 carry their fixed rate for 20 years, but TreasuryDirect also guarantees that the bond will be worth at least twice its purchase price at 20 years, even if the fixed rate alone would not get it there. At 2.40 percent, $10,000 compounds to only $16,114.64 after 20 years, so the guarantee pays a one-time adjustment up to $20,000. The guarantee implies a compound return of about 3.51 percent, since 2 to the one-twentieth power is 1.0351, which is well above the stated 2.40 percent rate. The catch is the shape of the return: almost nothing beats a decent savings account before year 20, and the payoff arrives all at once at the anniversary. The calculator applies the guarantee automatically when the bond type is set to EE and the holding period reaches 20 years, and the worked example shows the I bond at its current 4.26 percent composite still finishing ahead at $23,234.50 before tax, with the caveat that the I bond rate resets every six months while the EE guarantee is contractual.
No, the 4.26 percent lasts six months by design. An I bond's rate has two parts: a fixed rate that never changes for the 30-year life of the bond, and a semiannual inflation rate reset every May 1 and November 1 from the Consumer Price Index for All Urban Consumers. I bonds bought from May 1 to October 31, 2026 carry a 0.90 percent fixed rate plus a 3.34 percent annualized inflation component, the six-month CPI-U move from 324.8 in September 2025 to 330.213 in March 2026, for the 4.26 percent composite. Six months after purchase, the bond adopts the newest inflation component on its own anniversary schedule. The composite rate is floored at zero, so the bond never loses value, but it can earn nothing during deflation. This calculator holds the current composite rate constant across the whole holding period, which is a simplification in both directions: if inflation runs above 3.34 percent annualized the bond does better than shown, and if it runs below, the bond does worse. Only the 0.90 percent fixed portion is contractual.
Per Social Security number, per calendar year: $10,000 in electronic Series I bonds and $10,000 in electronic Series EE bonds, so a household of two savers can move $40,000 a year into the two series combined. Electronic bonds are bought in TreasuryDirect in any amount from $25 to $10,000, to the penny. Two features that used to expand the limits are gone: as of January 1, 2025, paper I bonds can no longer be bought with a federal tax refund, closing the old $5,000 paper channel, and payroll savings plans for new purchases were discontinued in 2025. Gifts count against the recipient's limit in the year they are delivered, not the year bought, which is how some savers still use the annual exclusion strategically: buying in December and delivering in January effectively gives the recipient two years of headroom. None of this affects the math on this page; it only caps how much of the calculator's advantage you can capture per year.
For the scenarios it models, close, with disclosed simplifications. Savings bonds earn interest monthly and compound semiannually, and this page follows the regulation's convention: value compounds at the composite rate each full six-month period, and months inside the current period accrue straight-line, which matches how TreasuryDirect's tables step. The three-month penalty, the EE doubling guarantee, and the federal tax at your marginal rate are applied as described. What the model deliberately does not do: it holds today's composite I bond rate constant for the entire holding period instead of simulating future inflation resets, it prices the taxable-account comparison at your savings APY taxed annually at your federal rate while ignoring state tax on the savings side, which slightly favors the bond, and it does not model the annual-reporting election or the education exclusion. For the exact current value of a bond you already own, including its actual rate history, TreasuryDirect's Savings Bond Calculator remains the authority; this page is for deciding whether to buy and how long to hold.
All calculation logic on this page is implemented from the primary documents below. Each one is listed with the figure it supplies, so any rate or threshold in the result can be traced back to its published source.
Same compounding math, different starting question.