I Bond Calculator

The I Bond Calculator works out the composite rate, the semiannual interest accrual, and the 3-month early-redemption penalty for a U.S. Series I savings bond. Enter your purchase amount, the fixed rate, and the semiannual inflation rate, and the tool projects exactly how your bond grows, how much interest you forfeit if you cash out before 5 years, and your true penalty-adjusted yield — all with a clear, step-by-step breakdown.

What Is a Series I Savings Bond?

An I Bond is a low-risk savings bond issued by the U.S. Treasury that is designed to protect your money from inflation. Its interest rate combines two parts: a fixed rate that stays the same for the 30-year life of the bond, and an inflation rate that the Treasury resets every May and November based on the Consumer Price Index. Because part of the rate tracks inflation, I Bonds preserve purchasing power better than most fixed-rate savings products.

I Bond Composite Rate Formula

The headline "composite rate" you see quoted is not simply the fixed rate plus inflation. The Treasury combines them with a small cross term:

The semiannual inflation rate is doubled because it is announced for a 6-month period, while the rate is expressed as an annual figure. The final cross term — fixed rate multiplied by the semiannual inflation rate — is small but real, and it is the piece most rough calculators leave out. The composite rate is also floored at 0%, so even during deflation an I Bond never loses value.

How I Bond Interest Accrues

I Bonds compound semiannually. Every 6 months the interest you have earned is added to your principal, and the next 6 months earn interest on that larger balance. The bond's value is updated monthly on the way to each compounding date, so you can see steady growth rather than a once-a-year jump. Interest accrues for up to 30 years, after which the bond stops earning and reaches final maturity.

The 3-Month Early-Redemption Penalty

I Bonds have two timing rules that this calculator models exactly:

• 12-month lock-up: You cannot cash in an I Bond at all during the first 12 months after purchase.
• 5-year penalty: If you redeem the bond after 12 months but before 5 years, you forfeit the most recent 3 months of interest. In effect, you receive the value the bond held 3 months earlier.

Once you pass the 5-year mark (60 months), the penalty disappears completely and you keep every cent of accrued interest. In the growth chart above, the gap between the solid accrued value line and the dashed redeemable value line is that rolling penalty — and you can watch it shrink to zero right at the 5-year milestone.

Penalty-Adjusted Yield

Most calculators show the headline rate, but what really matters is what you keep after the penalty. This tool computes your effective annual yield (APY) using the amount you would actually pocket at your chosen holding period:

Cashing out early can pull your real yield noticeably below the composite rate, while holding 5 years or more lets you capture the full rate.

I Bond Tax Treatment

I Bond interest is subject to federal income tax but is exempt from state and local income tax, which makes them attractive in high-tax states. You can defer the federal tax until you redeem the bond or it reaches final maturity at 30 years. Interest may even be tax-free if used for qualified higher-education expenses, subject to income limits — the so-called Education Savings Bond Program.

What Affects Your I Bond Return?

How to Use This Calculator

1. Enter your purchase amount: How much you invested, for example $10,000 (the annual electronic limit).
2. Enter the fixed rate: The fixed rate for your bond's issue period, found on TreasuryDirect.
3. Enter the semiannual inflation rate: The 6-month inflation rate the Treasury announced for that period.
4. Choose your holding period: Select the years and months you plan to hold the bond.
5. Click Calculate: Review your composite rate, accrued value, any early-redemption penalty, your penalty-adjusted yield, and a full step-by-step breakdown.

Frequently Asked Questions

How is the I Bond composite rate calculated?

The composite rate combines a fixed rate that lasts for the life of the bond with a variable inflation rate. The formula is: composite rate = fixed rate + (2 × the semiannual inflation rate) + (fixed rate × the semiannual inflation rate). The result is floored at 0%, so an I Bond can never lose value to deflation.

What is the early-redemption penalty on I Bonds?

If you cash in an I Bond before you have held it for 5 years, you forfeit the most recent 3 months of interest. For example, if you redeem after 2 years, you receive the value the bond had 3 months earlier. After 5 years there is no penalty and you keep all accrued interest.

When can I cash in an I Bond?

You cannot redeem an I Bond during the first 12 months. After 12 months you can cash it in at any time, but redeeming before 5 years costs you the last 3 months of interest. I Bonds keep earning interest for up to 30 years.

How often do I Bonds compound?

I Bonds compound interest semiannually, meaning every 6 months the interest earned is added to the principal and the next period earns interest on the larger balance. The value is updated monthly on the way to each semiannual compounding date.

Are I Bonds taxed?

I Bond interest is subject to federal income tax but is exempt from state and local income tax. You can defer the federal tax until you redeem the bond or it reaches final maturity at 30 years. Interest may be tax-free if used for qualified higher-education expenses, subject to income limits.

How much can I buy in I Bonds each year?

Each person can buy up to $10,000 in electronic I Bonds per calendar year through TreasuryDirect, plus up to $5,000 in paper I Bonds using a federal tax refund, for a combined maximum of $15,000 per year.

Additional Resources

• United States Savings Bonds - Wikipedia
• Series I Savings Bonds - TreasuryDirect