From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(November 1, 2006) -- For some people, U.S. savings bonds are what you give your newborn grandchild or your niece who just graduated from high school. According to the Virginia Society of CPAs, savings bonds could have a place in your own investment portfolio, particularly if you’re looking for low-risk investments. The might help you decide.

What types of U.S. savings bonds are available?

There are two types of savings bonds currently available — Series EE and Series I. As of May 1, 2005, newly issued Series EE bonds have a fixed interest rate, based on 10-year Treasury note yields. Series EE bonds purchased May 1997 through April 30, 2005 pay interest based on current market rates. The fixed rate and inflation adjustment on new bonds are announced every May 1 and November 1.

Series I savings bonds differ in that they pay an interest rate that is indexed for inflation, based on the Consumer Price Index. The inflation adjustment ensures that your savings earn money over and above inflation.

How are U.S. savings bonds sold?

Savings bonds are available in paper or electronic form. Paper Series EE and Series I bonds come in eight denominations: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. (Paper EE bonds are issued at 50 percent discount from face value.) Electronic Series EE and Series I bonds are sold at face value in any amount from $25 to $30,000.

There is an annual purchase limit of $30,000 per owner for Series EE bonds and $30,000 for Series I bonds. A husband and wife who purchase bonds as co-owners may purchase up to $60,000 in Series EE bonds and $60,000 in Series I bonds in a single year. Purchases of one series do not count against your limit for the other series.

How long do savings bonds earn interest?

Savings bonds earn interest on a tax-deferred basis for 30 years from the issue date.

Where do I buy savings bonds?

You can buy paper savings bonds at financial institutions authorized by the U.S. Treasury Department or through employer payroll deduction plans. You can buy and hold savings bonds in an electronic account at .

How can I find out how much my bonds are worth?

To calculate the value of your savings bonds, go to .

How do I redeem my savings bonds?

To cash in your Series EE or Series I bonds, take them, along with proper identification, to your financial institution. Keep in mind that savings bonds issued after February 2003 must be held for a minimum of one year before they can be redeemed. If you redeem them in less than five years after purchase, you forfeit the three most recent months of interest.

What tax advantages do savings bonds offer?

The interest earned on savings bonds is always exempt from state and local income taxes. You can defer federal income taxes on the interest your bonds earn until the savings bonds reach final maturity or you redeem them. However, you may elect to treat the annual increase in value of these bonds as income in each year.

Your earnings from Series EE and Series I savings bonds may be excluded from federal income tax if you pay qualified higher education expenses in the same year you redeem the savings bonds. Your household income must meet certain guidelines to qualify for this exclusion.

A CPA can help you determine how to make the most of your investment in savings bonds.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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