I Bond Rate Rises to 5.51% With a 1.40% Fixed Rate (Nov. 2026–Apr. 2027): How I Bond Interest Is Taxed and When It Can Be Tax-Free for College

One-sentence takeaway

TreasuryDirect has announced that Series I savings bonds bought from November 1, 2026 through April 30, 2027 earn a composite rate of 5.51%, including a 1.40% fixed rate that lasts for the life of the bond, the highest fixed rate since November 2006 (when it was also 1.40%), while EE bonds issued in the same window earn 2.90%. I bond interest is subject to federal income tax but exempt from state and local income tax, can be deferred until you cash the bond, and may be excluded from federal income under Form 8815 when used for qualified higher education expenses. Because each person can buy only $10,000 in electronic I bonds per calendar year and the 2026 limit ends on December 31, 2026, families who want the 1.40% fixed rate should plan the purchase timing, holding period, and reporting method together now.

News background

TreasuryDirect announces new I bond rates every May 1 and November 1. The figures announced for November 1, 2026 are a 1.40% fixed rate and a 2.04% semiannual inflation rate, based on the non-seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U).

The composite rate follows the official formula: fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate), or 0.0140 + 0.0408 + 0.0002856 = 0.0550856, which rounds to 5.51%.

The fixed rate is locked in at purchase and never changes; the inflation rate resets every six months based on each bond's issue month. I bonds earn interest monthly, compound semiannually, and earn interest for up to 30 years. You must hold them at least 12 months, and if you cash them before five years you lose the last three months of interest.

Since January 1, 2025, I bonds are sold only electronically in a TreasuryDirect account (minimum $25, then any amount to the penny).

Old vs. new

Bought May–October 2026: composite rate 4.26%, fixed rate 0.90%, semiannual inflation rate 1.67%.

Bought November 2026–April 2027: composite rate 5.51%, fixed rate 1.40%, semiannual inflation rate 2.04%.

EE bonds: 2.40% for bonds issued May–October 2026; 2.90% for bonds issued November 2026–April 2027, with Treasury's commitment that an EE bond doubles in value at 20 years.

Bonds you already own (calculated with the official formula): the new 2.04% inflation rate applies at each bond's next six-month period. Bonds with a 0% fixed rate (for example, bought May 2020–October 2022) earn about 4.08%; bonds with a 0.90% fixed rate earn about 5.00%; bonds with a 1.30% fixed rate (bought May 2023–April 2024) earn about 5.41%.

What has not changed: the annual limit is still $10,000 in electronic I bonds per SSN or EIN per calendar year for bonds you buy for yourself (purchases for a child or as gifts are counted separately). Interest is exempt from state and local income tax but subject to federal income tax, and federal estate and gift taxes and state estate or inheritance taxes still apply.

Self-check

If you have cash you will not need for at least a year and want an inflation hedge: I bonds are locked for 12 months and lose three months of interest if cashed within five years, so confirm your liquidity needs first.

If you live in a state with a meaningful income tax: I bond interest is state-tax-free, so compare I bonds, CDs, and high-yield savings on an after-tax basis, not on the headline rate alone.

If you plan to use the bonds for a child's college costs: the bonds must be in your name (or yours and your spouse's), and you must have been at least 24 years old before the issue date. Bonds registered in a child's name cannot use Form 8815 later.

If you have older I bonds and never reported the interest: by default all of it is reported in the year you cash the bonds or they mature, which can be a large amount; check how it affects that year's tax bracket, ACA premium tax credit, or other income-based benefits.

If your family is new to the U.S.: each person named as an owner needs an SSN and must be a U.S. citizen, a U.S. resident, or a civilian employee of the U.S. government; parents living in China generally cannot be owners. Corporations, partnerships, and other entities with an EIN can also buy electronic bonds in TreasuryDirect.

Simplified example

This is a simplified illustration. The interest amounts are hypothetical, not a forecast of future rates or returns; your TreasuryDirect account shows the actual interest.

Assume a married couple each buys $10,000 of I bonds in November 2026, for $20,000 in total. At 5.51% per year, interest for the first six months is about $20,000 × 5.51% ÷ 2 ≈ $551. After that, the rate resets with inflation every six months while the 1.40% fixed portion stays the same.

Scenario 1 (general use): Assume total interest of $5,000 when they cash the bonds after five years and a 22% federal marginal rate. Federal tax is about $1,100, and state income tax is $0. If the same $5,000 were bank interest in a state with an assumed 5% rate, they would owe about $250 more in state tax.

Scenario 2 (education): Assume joint MAGI of $160,000 in the year they cash the bonds and qualified tuition paid that year is at least the total redemption proceeds. Using the 2026 phaseout range for joint returns ($152,650 to $182,650), the exclusion is reduced by (160,000 − 152,650) ÷ 30,000 = 24.5%, so about $3,775 of interest is excluded from federal income and the remaining $1,225 is taxable.

The thresholds for the year you actually cash the bonds will apply; the IRS had not released figures for 2027 or later at the time of writing.

Action steps and timeline

Now through November 30, 2026: I bonds earn interest from the first day of the month you buy them, so any purchase made by the end of November earns interest for the full month. First confirm you can set the money aside for at least 12 months.

December 31, 2026: the 2026 limit of $10,000 per person ends. Each spouse, a child's account, and a business EIN have separate limits.

January 1, 2027: a new calendar-year limit begins. Purchases through April 30, 2027 still lock in the 1.40% fixed rate.

By January 31, 2027: if you cashed bonds in 2026, Form 1099-INT appears in your TreasuryDirect account (ManageDirect > Manage My Taxes).

April 15, 2027: file your 2026 Form 1040, attaching Form 8815 if you cashed bonds for tuition in 2026. Switching from deferral to annual reporting needs no IRS approval, but you must report all previously accrued interest on all your savings bonds that year; switching back requires Form 3115 or the method in IRS Publication 550.

May 1, 2027: Treasury announces the next rates; reassess whether to buy more.

How YCL can help

After-tax yield comparison: we compare the after-tax yields of I bonds, CDs, Treasury bills, and high-yield savings at your federal and state marginal rates and recommend an allocation that fits your liquidity needs. We do not sell financial products.

Education funding plan: we compare I bonds plus Form 8815, 529 plans, and Coverdell ESAs, model the MAGI phaseout, choose the redemption year, and coordinate with the American Opportunity Tax Credit so the same expenses are not counted twice.

Interest reporting: we report Form 1099-INT, assess whether annual or deferred reporting fits better, and handle bonds in a child's name, co-owned bonds, and reissued bonds.

Cross-border families and businesses: we review SSN and tax residency status, gift reporting (Form 709 / Form 3520), and the bookkeeping and tax treatment when a business buys I bonds with idle cash.

YCL Accounting & Consulting is a multi-state CPA firm serving clients nationwide in English and Chinese, led by co-founder Gloria (Chenchen) Liu, CPA.

FAQ

Q: Should I buy now or wait for the May 2027 rate?

A: The 1.40% fixed rate is locked in at purchase for the life of the bond. The fixed rate announced on May 1, 2027 could be higher or lower, and no one can predict it. Many families use one year's limit in 2026 and another in 2027 rather than betting on a single period.

Q: Is I bond interest subject to state tax?

A: No. It is exempt from state and local income tax but subject to federal income tax. Federal estate and gift taxes and state estate or inheritance taxes still apply.

Q: Can I bonds in my child's name be tax-free for tuition?

A: No. To exclude interest on Form 8815, the bonds must be in the name of an owner who was at least 24 before the issue date (you, or you and your spouse), and you must pay qualified expenses in the year you cash them. For bonds in a child's name, reporting the interest annually may be worth considering.

Q: Can a corporation or LLC buy I bonds?

A: Corporations, partnerships, and other entities with an EIN can buy electronic I bonds in TreasuryDirect, up to $10,000 per EIN per calendar year. The interest is business income; confirm the state-level treatment and bookkeeping with your CPA.

Book a consult

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YCL Accounting & Consulting (YCL Tax, Accounting & Advisory)

Multi-state CPA firm serving clients nationwide

Website: yclcpa.com | Email: info@yclcpa.com

Phone: 919-802-8376 / 980-202-0666 | WeChat: YCLUSA

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Book a free consultation with co-founder Gloria (Chenchen) Liu, CPA.

Disclaimer

This article is general tax information, not tax, legal, or investment advice for any individual. It does not promise any tax result or investment return and does not recommend buying any financial product. It is based on the I bond and EE bond rates published by TreasuryDirect, TreasuryDirect's "Tax information for EE and I bonds" and "Using savings bonds for higher education" pages, IRS Rev. Proc. 2025-32 section 4.17, and IRS Publications 970 and 550. Rates for bonds you already own are calculated with the official formula; your TreasuryDirect account is authoritative. Check the latest Treasury and IRS guidance and consult a licensed professional.