U.S. Savings Bonds

U.S. savings bonds are an extremely low-risk investment, completely exempt from state taxation.

Savings bonds sell for less than their face value and may be redeemed at fixed intervals for fixed amounts. The increase in value over the purchase price is reported as interest income on your tax return, either each year or at redemption.

If you redeem Series EE bonds purchased after 1989 in your own name to pay for an immediate family member's college expenses, you may be able to exclude the interest altogether from your taxable income. This benefit is phased out as income levels increase. To see if your income level qualifies, click here.

"I" bonds offer inflation protection. The interest paid on the bonds has two components: a fixed rate and a twice-yearly inflation adjustment based on the consumer price index. Like regular savings bonds, the interest income can be deferred until redemption.

For more information, go to www.savingsbonds.gov.