How the rate is built
An I bond's rate has two parts. The fixed rate is set when the bond is issued and never changes for that bond. The inflation rate is reset every six months. TreasuryDirect combines them into a composite rate with this formula:
| I bonds issued May 1, 2026 to October 31, 2026 | Rate |
|---|---|
| Fixed rate, for the life of the bond | 0.90% |
| Semiannual inflation rate, announced May 1, 2026 | 1.67% |
| Composite rate: 0.90% + 2 × 1.67% + 0.90% × 1.67% | 4.26% |
New rates are announced every May 1 and November 1. A bond issued in this window keeps its 0.90 percent fixed rate for life, while its inflation part changes every six months. The composite rate cannot go below zero: if negative inflation would push it under, TreasuryDirect stops it at zero. The guide how the CPI measures inflation explains the index the inflation rate comes from.
The rules that matter
| Rule | TreasuryDirect |
|---|---|
| Yearly purchase limit | up to $10,000 in electronic I bonds per calendar year for yourself as owner; gifts and bonds for a child count separately |
| Earliest cash-in | after 12 months |
| Penalty before 5 years | you lose the last 3 months of interest |
| How long it earns | 30 years, unless you cash it in before then |
| Compounding | semiannual: twice a year the interest from the past six months is added to the bond's principal |
$10,000 over the first years
The table compounds $10,000 twice a year at 4.26%, as if the rate never changed. It will change every six months, so treat the figures as an illustration of the mechanics, not a forecast:
| Held for | Value at that rate | If cashed in then |
|---|---|---|
| 6 months | $10,213 | not allowed, under 12 months |
| 1 year | $10,430 | less the last 3 months of interest |
| 3 years | $11,346 | less the last 3 months of interest |
| 5 years | $12,343 | no penalty |
The compound interest calculator runs the same arithmetic with twice-yearly compounding for any rate you want to test, and the inflation calculator shows what the value is worth in today's dollars.
Taxes
- Federal income tax applies to the interest; state and local income tax does not.
- You choose the timing: report the earnings every year, or wait and report all of them when you cash the bond or it stops earning interest.
- Education: TreasuryDirect says that if you use the money for qualified higher education expenses you may not have to pay tax on the earnings; IRS Publication 970 has the conditions.
The fixed-rate sibling, with a guarantee to double in 20 years, is covered in EE bonds explained. The guide is savings interest taxable compares I bond interest with bank and money market interest, and FDIC insurance limits covers the protection on the bank side. This guide reports the figures TreasuryDirect publishes for bonds issued May 1 to October 31, 2026; the rate for November 2026 onward is announced on November 1.
Frequently asked questions
What is the I bond rate right now?
TreasuryDirect lists a composite rate of 4.26 percent for I bonds issued from May 1, 2026 to October 31, 2026, made up of a fixed rate of 0.90 percent and a semiannual inflation rate of 1.67 percent. The fixed rate stays with a bond for its whole life; the inflation part resets every six months, and new rates are announced each May 1 and November 1.
How much can I invest in I bonds?
Up to $10,000 in electronic I bonds per calendar year for yourself as owner, through TreasuryDirect. TreasuryDirect says that limit is separate from bonds you buy as a gift for someone else or for a child.
When can I cash in an I bond?
After 12 months. If you cash it in before it is 5 years old, you lose the last 3 months of interest. An I bond earns interest for 30 years unless you cash it in before then.
How are I bonds taxed?
The interest is subject to federal income tax but not to state or local income tax. TreasuryDirect says you can choose to report each year's earnings or wait and report all the earnings when you cash the bond, and if you use the money for qualified higher education expenses you may not have to pay tax on the earnings at all.
Can an I bond lose money?
Not through its rate. TreasuryDirect says the composite rate cannot go below zero: if negative inflation would pull it under zero, it stops at zero, and the value already earned stays. The only loss is the three months of interest given up by cashing in before five years.
Sources
- TreasuryDirect: I bonds (composite rate 4.26 percent including a 0.90 percent fixed rate for bonds issued May 1, 2026 to October 31, 2026; the rate from a fixed rate and an inflation rate reset every 6 months; up to $10,000 in electronic I bonds; cash in after 12 months; lose the last 3 months of interest before 5 years; earns interest for 30 years; federal tax, no state or local tax; report yearly or at redemption; education exclusion)
- TreasuryDirect: I bond interest rates (composite rate = fixed rate + 2 × semiannual inflation rate + fixed rate × semiannual inflation rate; the 1.67 percent semiannual inflation rate announced May 1, 2026; rates announced every May 1 and November 1; the fixed rate never changes for a bond; the composite rate stops at zero; interest added to the principal twice a year)
- TreasuryDirect: Buy a savings bond (up to $10,000 a calendar year in Series I electronic bonds and in Series EE electronic bonds for yourself as owner; bonds bought as gifts or for a child count separately)
General information based on the sources above, not tax, legal or financial advice.