What Series EE Bonds Are

Series EE bonds are savings bonds issued by the U.S. Treasury that you buy at half their face value and cash in later for the full amount plus interest. If you buy a $100 EE bond, you pay $50 upfront. When you cash it in — whether that's five years later or thirty years later — you get back your $50 plus all the interest that accumulated.

The Treasury guarantees that your EE bond will at least double in value over 20 years, even if interest rates stay low. That means a $50 bond will be worth at least $100 after two decades. If interest rates rise and the bond earns more, you get the higher amount. You cannot lose money on an EE bond.

EE bonds are backed by the full faith and credit of the U.S. government, which means the risk of the Treasury failing to pay you back is essentially zero. They are not traded on any market — you cannot sell them to someone else. You can only redeem them back to the Treasury.

Key Takeaways

  • You purchase Series EE bonds at 50% of face value, so a $100 bond costs $50 cash upfront.
  • The Treasury guarantees your bond will at least double in 20 years, and you earn additional interest if rates are higher.
  • You can redeem EE bonds anytime after one year, though redeeming before five years means you lose the last three months of interest.
  • Interest on EE bonds is exempt from state and local income tax, and federal tax can be deferred until you cash the bond in.
  • You can buy EE bonds only through TreasuryDirect, the government's online platform — not through banks or brokers.

How Interest Accrues on EE Bonds

EE bonds earn interest monthly, but you do not receive payments along the way. Instead, the interest is added to the bond's value automatically. When you cash in the bond, you receive the original purchase price plus all accumulated interest in one lump sum.

The interest rate on new EE bonds is set by the Treasury and changes every six months, on May 1 and November 1. The current rate applies to all bonds purchased during that six-month period. Once your bond is issued, its rate is locked in for the life of the bond — it does not change if Treasury rates drop later.

Because rates are set every six months, the rate you get depends on when you buy. If you purchase in January, your bond earns the rate announced on November 1 of the previous year. If you wait until June, you get the rate announced on May 1. You can check the current rate on the TreasuryDirect website before you buy.

When You Can Cash In an EE Bond

You can redeem an EE bond anytime after you own it for one year. If you cash it in before five years have passed, you lose the last three months of interest as a penalty. After five years, you can redeem without any penalty.

There is no maximum time limit — you can hold an EE bond for 30 years or longer if you choose. The bond will continue earning interest for up to 30 years from the issue date. After 30 years, it stops earning interest, and you should redeem it.

You redeem an EE bond through TreasuryDirect by logging into your account and requesting the redemption. The money is deposited into your linked bank account within a few business days. You receive a 1099-INT form at tax time reporting the interest you earned.

Tax Treatment of EE Bond Interest

Interest earned on EE bonds is exempt from state and local income tax — you only owe federal tax on the earnings. This can make EE bonds attractive if you live in a state with high income tax.

You have two choices for when to pay federal tax on the interest. You can report the interest each year as it accrues, even though you have not received the money yet. Or you can defer all the tax until you redeem the bond, at which point you report the total interest earned on that year's tax return.

Most people choose to defer the tax, since it means you do not have to pay anything until you actually cash in the bond. If you redeem a bond that earned $500 in interest, you report that $500 as income on the year you redeem it.

There is one special tax break: if you use EE bond proceeds to pay for may have access to education expenses — tuition and fees at an accredited college or university, or contributions to a 529 plan — you may be able to exclude the interest from federal tax entirely. Income limits apply, and you must meet other conditions. The IRS Form 8815 is used to claim this exclusion.

Buying EE Bonds Through TreasuryDirect

You can only buy Series EE bonds directly from the U.S. Treasury through TreasuryDirect, an online platform at treasurydirect.gov. You cannot buy them through a bank, broker, or financial advisor.

To open a TreasuryDirect account, you need a Social Security number, a valid email address, and a U.S. bank account for deposits and withdrawals. You can set up an account in about 15 minutes. Once your account is open, you can buy bonds immediately.

You can purchase EE bonds in any amount from $25 to $10,000 per calendar year. You can buy them as often as you want during the year, as long as the total does not exceed $10,000. If you are married and file jointly, your spouse can also buy up to $10,000 per year in their own account, for a household total of $20,000.

EE bonds are issued electronically — there are no paper certificates. Your bonds are held in your TreasuryDirect account, and you can view their current value anytime you log in.

EE Bonds Versus Other Savings Options

EE bonds are slower-growing than stocks or stock mutual funds, but they carry no market risk. Your money is may provide not to lose value. They also offer better returns than a regular savings account at most banks, though rates on high-yield savings accounts and money market accounts can sometimes match or exceed EE bond rates.

Unlike a savings account, EE bonds lock your money away for at least one year, and you lose three months of interest if you withdraw before five years. This makes them better suited for money you do not plan to touch soon. If you need access to your cash within a year, a high-yield savings account is a better choice.

EE bonds are also less flexible than Treasury bills or Treasury notes, which can be bought in smaller denominations and sold on the secondary market if you need cash before maturity. EE bonds cannot be sold — only redeemed back to the Treasury.

Frequently Asked Questions

Can I buy Series EE bonds for someone else as a gift?

Yes. You can purchase an EE bond in someone else's name through TreasuryDirect if you have their Social Security number and permission. The bond is registered in their name, and they own it. You can also buy bonds in the name of a minor child, though the child's Social Security number is required.

What happens if I need the money before one year?

You cannot redeem an EE bond before one year has passed. If you need cash sooner, you will have to use a different savings method. This is one reason EE bonds work best for money you are certain you will not need for at least 12 months.

Do I have to report EE bond interest on my taxes every year?

No, unless you choose to. You can defer reporting the interest until you redeem the bond. At that point, you report all the accumulated interest on your tax return for that year. This is the most common approach and usually the simplest for your taxes.

What is the current interest rate on EE bonds?

The rate changes every six months on May 1 and November 1. You can find the current rate on treasurydirect.gov before you buy. Rates have varied widely over the years — they were as low as 0.10% in 2020 and higher in recent years as the Federal Reserve raised rates.

Can I lose money on an EE bond?

No. The Treasury guarantees that your EE bond will at least double in value over 20 years. Even if interest rates fall to zero, your bond will reach its may provide minimum value. You cannot get back less than you put in.