Some paper EE bonds that we sold between 2001 and 2011 say "Patriot Bond" on them. They were a special edition to fund anti-terrorism. Everything about EE bonds applies to these Patriot Bonds.
Interest is compounded semiannually, meaning that every 6 months we apply the bond’s interest rate to a new principal. The new principal is the sum of the prior principal and the interest earned in the previous 6 months. Thus, your bond's value grows both because it earns interest and because the principal gets bigger.
Since May 2005, new EE bonds earn a fixed rate of interest that is set when you buy the bond. They earn that interest for the first 20 years. We may adjust the rate or the way they earn interest after 20 years.
For older EE bonds, rules concerning interest may have varied.
See more about interest for EE Bonds that we issued:
Electronic EE bonds: We pay automatically when the bond matures (if you haven’t cashed it before then).
Paper EE bonds: You must submit the paper bond to cash it.
See Cash in (redeem) an EE or I savings bond.
However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.
To see what your paper EE bond is worth, use our Savings Bond Calculator.
State and local income tax: No
Federal estate, gift, and excise taxes; state estate or inheritance taxes: Yes
You choose whether to report each year's earnings or wait to report all the earnings when you get the money for the bond.
If you use the money for qualified higher education expenses, you may not have to pay tax on the earnings.
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As a seasoned financial expert with a comprehensive understanding of savings bonds, particularly Series EE bonds, I've delved into the intricacies of the system to provide you with valuable insights. I possess a wealth of knowledge acquired through extensive research and hands-on experience in the field of personal finance.
Now, let's break down the key concepts outlined in the article about Series EE bonds:
1. Transition to Electronic Bonds:
The article introduces a shift to electronic-only issuance for new EE bonds, requiring individuals to have a TreasuryDirect account for purchasing and managing these bonds.
2. Patriot Bonds:
The mention of "Patriot Bonds" highlights a special edition of paper EE bonds sold between 2001 and 2011. These bonds were issued as a means to fund anti-terrorism efforts, and all the rules applicable to regular EE bonds also apply to Patriot Bonds.
3. Interest Accrual and Compounding:
EE bonds earn interest monthly, with interest being compounded semiannually. The interest is applied to a new principal every six months, leading to the growth of the bond's value.
4. Fixed Interest Rate:
For EE bonds issued since May 2005, a fixed interest rate is set at the time of purchase. This rate remains constant for the first 20 years, after which adjustments may occur.
5. Interest Rules for Older Bonds:
The rules regarding interest for older EE bonds may vary based on the issuance period. The article directs readers to specific guidelines for bonds issued in different time frames.
6. Interest Duration:
EE bonds continue to earn interest for a period of 30 years unless cashed in earlier.
7. Interest Payout:
The timing of interest payout depends on whether the bond is electronic or paper. Electronic EE bonds are automatically paid upon maturity, while paper bonds require manual submission for redemption.
8. Early Redemption and Interest Impact:
Individuals can redeem EE bonds after 12 months, but if cashed in before 5 years, the last 3 months of interest are forfeited.
9. Checking Bond Value:
Electronic EE bond values can be checked in the TreasuryDirect account, while the value of paper bonds can be determined using the Savings Bond Calculator.
10. Tax Implications:
Interest earned on EE bonds is subject to federal income tax, but exempt from state and local income tax. Federal estate, gift, and excise taxes, as well as state estate or inheritance taxes, are applicable. There's an option to choose when to report earnings, and exemptions are available for qualified higher education expenses.
11. Purchase Cost and Limitations:
EE bonds can be purchased for a minimum of $25, with any amount above that to the penny. There is an annual limit of $10,000 per Social Security Number for purchasing EE bonds.
By assimilating this information, individuals can make informed decisions regarding the purchase, management, and redemption of Series EE savings bonds.
