Are I Bonds Taxable? 10 Common Situations

Series I bonds are a popular investment that can also help you save on taxes, but the federal income tax consequences can be complex.

A picture of a Series I savings bonds.
(Image credit: Getty Images)

As investors seek to insulate their portfolios from inflation and the ups and downs in the stock market, many have turned to Series I savings bonds (I bonds). Because of the high inflation rate, I bonds are paying an interest rate of 4.28%, a healthy, safe return on your investment. This rate applies for bonds issued May 1, 2024, through October 31, 2024. 

The inflation rate changes every six months from the bond’s issue date. But don't just focus on the investment return. I bonds also have important tax advantages for owners. For example, interest earned on I bonds is exempt from state and local taxation. Also, owners can defer federal income tax on the accrued interest for up to 30 years.

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Joy Taylor
Editor, The Kiplinger Tax Letter

Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.