I Bonds vs EE Bonds in 2026: Rates, Rules, and Which to Buy for the Long Run

Taxes and the education exclusion

• Federal income tax: interest on I and EE bonds is subject to federal tax. You can generally defer reporting interest until you redeem the bond or it stops earning; you may also elect to report interest annually.
• State and local tax: interest is generally exempt from state and local income tax.
• Education exclusion: under the education exclusion rules, interest on Series EE and I bonds issued after 1989 may be excluded from federal tax when used to pay qualified higher‑education expenses, subject to income limits and other eligibility conditions. This exclusion is claimed on IRS Form 8815 and explained in IRS Publication 970. Read the IRS materials for the full, current eligibility details.

See the IRS Form 8815 page and TreasuryDirect’s tax guidance for authoritative details.

Which to buy — a simple horizon test

Ask yourself: will this money stay invested for 20 years?

• If yes (and you value a time-specific Treasury guarantee): under the current program terms, an EE bond held for 20 years is guaranteed to be worth twice its purchase price, which is equivalent to about 3.5% annualized over that exact period. Confirm the feature in TreasuryDirect’s current EE-versus-I comparison, because future issuance terms can change. The trade-off is purchasing-power risk if inflation runs above that pace.
• If you might need flexibility or want a rate that responds to measured inflation: I bonds may be worth comparing. Their inflation component resets semiannually using CPI‑U, and you can redeem after year one (with an early-redemption penalty if within five years). This does not guarantee that an I bond will outperform an EE bond or preserve your household's purchasing power after tax.
• If both features appeal: because purchase limits are generally applied per series, you can buy both I and EE bonds in the same year up to each series’ limit and split your exposure between inflation protection and the doubling guarantee.

No universal “better” answer exists; the right choice depends on horizon, inflation expectations, and whether you value flexibility or a time‑specific guarantee.

Savings bonds vs TIPS and marketable Treasuries

I bonds and Treasury Inflation‑Protected Securities (TIPS) both provide inflation linkage, but they differ:

• I bonds are non‑marketable, adjust via CPI‑U at preset intervals, and aren’t subject to market price swings.
• TIPS are marketable, trade on markets, and their market price can change with real yields and interest‑rate moves; they also receive inflation adjustments to principal.
• Which is better depends on whether you need tradability/liquidity or prefer a non‑marketable instrument that won’t drop in nominal dollar value.

For more on TIPS and marketable Treasuries, see Finelo’s TIPS guide and Treasury overview.

How to buy (procedural overview)

1. Create a free account at TreasuryDirect.gov (you’ll need your Social Security number and a linked bank account).
2. Use the BuyDirect function, select Series I or Series EE, enter an amount (subject to minimums and annual limits), and authorize payment from your bank.
3. Electronic bonds are held in your TreasuryDirect account; redemptions are paid to your linked bank account.
4. This is a procedural summary—follow TreasuryDirect’s site prompts for identity verification and current steps.

FAQ

Q: Do EE bonds really double in 20 years? A: The Treasury’s program wording guarantees that an EE bond will double in value if held 20 years; the Treasury will top up the bond at year 20 if needed. That top‑up applies only at the 20‑year mark.

Q: Which pays more, I or EE? A: It depends on inflation and holding period. EE’s doubling implies an effective return of ~3.53% if held exactly 20 years. An I bond will outperform if its fixed plus inflation components average higher than that; for horizons shorter than 20 years an I bond often makes more sense.

Q: When can I cash a savings bond without penalty? A: You cannot redeem during the first 12 months. Between months 12 and 60 you can redeem but forfeit the last three months’ interest. After month 60 you can redeem without penalty.

Q: How much can I buy per year? A: The Treasury posts current per‑person annual purchase limits and minimums for electronic purchases; limits are typically applied per series.

Q: Are savings bonds taxable? A: Interest is subject to federal tax (deferrable until redemption) and generally exempt from state and local tax. Interest used for qualified education expenses may be excluded under IRS rules; see IRS Form 8815 and Publication 970.

Q: Can savings bonds lose money? A: Savings bonds’ nominal dollar balances do not fall because they are non‑marketable. The main risk is purchasing‑power loss (inflation outpacing the bond’s return), plus opportunity cost and the EE bond’s time‑specific guarantee (no doubling if redeemed before 20 years).

Next steps

• Check current rates, purchase minimums, annual limits, and redemption rules in TreasuryDirect’s official comparison: www.treasurydirect.gov
• If you plan to use bond proceeds for education, review IRS Form 8815 and Publication 970 for eligibility and income‑limit details.
• Compare savings bonds to TIPS and marketable Treasuries if you want tradability or a different inflation profile (see Finelo’s TIPS guide and Treasury overview).

Related Finelo guides: TIPS bonds, Treasury bills vs notes vs bonds, bond ladder, and high‑yield savings account comparisons. For official program language and current figures, consult TreasuryDirect’s EE-versus-I comparison (www.treasurydirect.gov) and savings-bond FAQs (www.treasurydirect.gov), plus current IRS guidance for any education-tax exclusion.

For more educational resources, visit Finelo.

For readers in the United Kingdom

The main article contrasts US savings bonds. In the UK, savings bonds differ in structure and operation, and the choices available may not align directly with US options like I Bonds or EE Bonds. The UK offers various government-backed savings products, but they'll come with different features and regulations. For more about UK savings products, check: www.nsandi.com. Product labels can sound similar across markets, but ownership, tax treatment, access rules, and consumer protections may differ. The comparison is contextual rather than a substitute for checking current UK product documents and official guidance. Verify current eligibility and rules with the relevant UK authority.

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Disclaimer

This article is provided by Finelo for educational and informational purposes only. Finelo does not provide financial, investment, tax, legal, or insurance advice. Consider your circumstances and consult an appropriately qualified professional before making financial decisions.