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I-Bond and T-Bill Yield Calculator

Calculate I-Bond composite rate accrual and T-Bill annualized investment yield to compare inflation-protected and short-term government securities.

Frequently Asked Questions

How is the I-Bond composite rate calculated?

It combines the fixed rate and the semiannual inflation rate: composite equals fixed plus twice the semiannual inflation rate plus the product of the two. Interest then accrues on your principal for the months held.

Why does the T-bill mode use 365 days?

It reports the investment (bond-equivalent) yield, which uses the purchase price and a 365-day year so it can be compared with other investments, rather than the 360-day discount yield.

Are I-Bonds and T-bills taxed the same?

Both are exempt from state and local income tax. I-Bond interest can be deferred until you redeem the bond, while T-bill interest is taxed when the bill matures.

Is this investment advice?

No. It is a general estimate and is not investment, tax, or financial advice. Confirm current rates at TreasuryDirect.

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Estimates only. Not investment advice.

Investment Disclaimer: Estimates only. Not investment advice.

This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.

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How This Calculator Works

This tool has two modes. In I-Bond mode it builds the composite rate from the fixed rate and the semiannual inflation rate, then accrues interest on your principal over the months held. In Treasury bill mode it computes the investment (bond-equivalent) yield from the face value, the purchase price, and the days to maturity. An optional tax rate shows the after-tax figure.

Formula

I-Bond composite = fixed + (2 × semiannual inflation) + (fixed × semiannual inflation). Earnings = principal × composite × (months ÷ 12). T-Bill investment yield = ((face − price) ÷ price) × (365 ÷ days).

Worked Example

A $1,000 T-bill bought at $985, maturing in 91 days. Discount = 1,000 − 985 = $15. Investment yield = (15 ÷ 985) × (365 ÷ 91) ≈ 6.11%.

I-Bond Mechanics: How the Rate Resets

I-Bonds earn a composite rate made up of two components: a fixed rate set for the life of the bond at the time of purchase, and an inflation component that resets every six months based on changes in the CPI-U (the Consumer Price Index for All Urban Consumers). The formula is:

Composite rate = fixed + (2 × semiannual CPI-U change) + (fixed × semiannual CPI-U change)

The Treasury announces new fixed rates and inflation components each May and November. The inflation component resets on a schedule tied to your individual purchase month, not a universal calendar date. If you bought in March, your rate resets each September and March. The composite rate is floored at 0%: during periods of deflation the rate cannot go negative, protecting your principal.

The fixed rate is the more durable benefit. A fixed rate of 1.3% means every dollar in that bond earns 1.3% above CPI inflation for its entire 30-year life. Fixed rates vary significantly over time; periods of low Fed rates produced fixed rates near 0%, while more recent I-Bond series have offered higher fixed components. Choosing to buy when the fixed rate is elevated is a long-term advantage. The annual purchase limit is $10,000 per Social Security number. Taxpayers who receive a federal refund can direct up to $5,000 additional per year into paper I-Bonds through Form 8888, bringing the maximum to $15,000 per person annually.

Redemption Rules and the 3-Month Penalty

I-Bonds cannot be redeemed at all during the first 12 months after purchase. They are completely illiquid for that period, which distinguishes them sharply from T-bills and most other fixed-income instruments. Plan purchases so you will not need the funds within the first year.

After 12 months and before 5 years of ownership, redeeming an I-Bond costs the most recent 3 months of interest. If your bond is earning a high composite rate when you sell, those three forfeited months represent a real cost. After holding for 5 full years, there is no early redemption penalty and you receive all accrued interest. I-Bonds reach final maturity at 30 years, after which they stop accruing interest.

Tax treatment: I-Bond interest is subject to federal income tax but is exempt from state and local income tax. Uniquely, you can defer reporting the interest until you redeem the bond or it matures, which allows multi-year tax-deferred compounding. If the bond proceeds are used for qualified education expenses, the interest may be entirely excludable from federal income as well (subject to income phase-outs). You must report and pay federal tax in the year of redemption.

I-Bonds vs. T-Bills vs. TIPS

These three instruments are all backed by the U.S. Treasury but serve different purposes in a portfolio.

Treasury Bills

T-bills mature in 4, 8, 13, 17, 26, or 52 weeks. They are sold at a discount to face value and mature at par, with the difference being your interest. T-bills are highly liquid with an active secondary market, and they are issued in large sizes with $100 minimums. In a high-rate environment, T-bill yields can be competitive with or exceed longer-term bonds (inverted curve), making them attractive for cash management. Interest is taxable federally and exempt from state and local tax, but unlike I-bonds there is no deferral: you owe tax in the calendar year the bill matures.

I-Bonds

I-Bonds are best suited for the inflation-protection role in a long-term savings context. The $10,000 annual cap limits their use as a primary vehicle, but for tax-deferred inflation-protected savings with no credit risk and no secondary-market price volatility, they are unmatched. They are most valuable when inflation is running above the yield on comparable-maturity nominal bonds and when you can hold for at least 5 years to avoid the penalty.

TIPS

Treasury Inflation-Protected Securities adjust their principal upward with CPI inflation; the coupon is a fixed percentage of the (growing) principal. TIPS are tradeable on secondary markets and available in large sizes, making them practical for institutional and large individual portfolios. However, TIPS generate "phantom income": the inflation adjustment to principal is taxable in the year it accrues, even though you do not receive cash until maturity. This makes TIPS best held in tax-deferred accounts. During deflationary periods, TIPS principal adjusts downward but is guaranteed not to fall below the original par value at maturity.

Common Mistakes

Entering the annual inflation rate where the semiannual rate is expected for I-Bonds.
Using a 360-day basis; this tool uses 365 days for the investment yield.
Forgetting that I-Bonds have a 12-month minimum hold and a 3-month interest penalty before 5 years.
Treating the result as guaranteed; it is a general estimate, not investment or tax advice.

Tips & FAQ

Why two yields for T-bills? The discount yield uses face value and 360 days; the investment yield uses price and 365 days and is more comparable to other investments. This tool reports the investment yield.

Are I-Bonds and T-bills taxed the same? Both are exempt from state and local income tax. I-Bond interest can be deferred until redemption; T-bill interest is taxed when the bill matures.

Can I buy I-bonds in an IRA? No. I-Bonds cannot be held in an IRA, 401(k), or any tax-advantaged retirement account. They must be owned individually through TreasuryDirect or in paper form. Since I-Bond interest is already tax-deferred until redemption and state-tax-exempt, the IRA wrapper would provide little additional benefit anyway. TIPS, which can trigger annual phantom-income tax, are much better suited for IRAs.

How do I buy I-bonds? Electronic I-Bonds are purchased through TreasuryDirect.gov, the U.S. Treasury's direct website. You create an account linked to a bank account and purchase in any amount from $25 to $10,000 per year (in penny increments). Paper I-Bonds are only available by directing a federal tax refund to bonds on IRS Form 8888, up to $5,000. I-Bonds are not available through brokerages or banks directly; TreasuryDirect is the only electronic channel.

Is this advice? No. It is a general estimate and is not investment, tax, or financial advice. Confirm current rates at TreasuryDirect.