There are several ways to purchase series EE and I bonds, including:
- Purchasing from any Federal Reserve bank or branch.
- Buying them through your bank
- Through a payroll deduction plan at work.
- And online through TreasuryDirect.
Tax breaks
Interest on EE and I bonds is exempt from all state and local income taxes, and your options for paying federal income taxes are unique to savings bonds. You can either pay the tax each year as the interest accrues, or postpone paying the tax until you cash in the bond or give it to someone else, or until it matures.
If EE or I bonds are redeemed to pay college tuition or fees, or are rolled into a Section 529 state college savings plan, the money could be tax-free if your income remains below certain levels. Consult the U.S. Bureau of the Fiscal Service's Web site for more information.
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Cashing in
You must hang onto your EE bonds for at least six months, and you'll pay a three-month interest penalty if you cash them in during the first five years. Remember, EE and I bonds earn interest for up to 30 years, and cashing in early means you will be giving up future interest growth. (Likewise, holding the bonds longer than 30 years gains you nothing.)
Also be mindful of when you cash out. Interest is added to savings bonds at specific intervals. If you redeem your bond before the interest is posted, you lose it. For example, if interest is posted in, say, April and October, redeeming bonds in September instead of October would cost you six months' worth of interest.
You can find out how much your bonds are worth at TreasuryDirect.gov
Most financial institutions will cash the bonds as long as you are an account holder, or have proof of identification.
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