Series EE Bond

What is a Series EE Bond?

A Series EE bond is a U.S. Treasury savings bond—also called a “Patriot Bond” on some paper issues—that is non-marketable and backed by the federal government. It is designed as a low-risk, interest-bearing savings vehicle with a guarantee to at least double in value over the typical 20-year initial term. Some EE bonds continue to earn interest for up to 30 years from issuance.

How Series EE Bonds work

• Series EE bonds are non-marketable securities, meaning they cannot be bought or sold on the open market.
• Interest rates for bonds issued after May 2005 are set as a fixed rate applied semiannually (May 1 and November 1). The rate announced on those dates applies to all bonds issued during the following six months.
• Bonds increase in value monthly; interest is reflected in the bond’s value and compounds according to Treasury rules.
• The Treasury guarantees that certain EE issues will at least double in value if held for 20 years.

Key features

• Guaranteed minimum growth: The Treasury assurance of doubling in value over 20 years is a distinguishing feature.
• Low risk: Backed by the U.S. government.
• Tax treatment: Interest is exempt from state and local taxes; federal income tax applies when the bond is redeemed or reaches final maturity.
• Paper vs. electronic: Paper EE bonds were historically sold at half their face value; electronic EE bonds (purchased via TreasuryDirect) are bought at full face value.
• Minor corrections: Small typographical errors (e.g., name, address, SSN) typically do not require reissuing the bond.
• “Patriot Bond” label: Paper EE bonds issued after Dec. 10, 2001, may bear this label; it does not change the bond’s terms.

Eligibility and purchase limits

• Eligible purchasers include U.S. citizens, official U.S. residents, minors, and U.S. government employees (regardless of citizenship).
• Minimum purchase: $25.
• Annual purchase limit: $10,000 per calendar year (for electronic purchases).
• Holding requirements: Bonds must be held at least 12 months before redemption. Redeeming within the first five years results in the forfeiture of three months’ interest.
• Interest accrual: EE bonds can earn interest for up to 30 years from the issue date.

Tax treatment and timing

• State and local taxes: Interest is exempt.
• Federal taxes: Interest is subject to federal income tax and is generally reported in the year the bond is redeemed or reaches final maturity unless the owner elects a different reporting option (see Treasury guidance).
• Redemption and reporting: Federal tax liability typically arises upon redemption or maturity.

Buying and managing Series EE Bonds

• Series EE bonds are available only through the U.S. Treasury. Electronic bonds are purchased via TreasuryDirect.
• Keep records of purchase, issue date, and ownership to determine holding period, tax reporting, and maturity.

Pros and cons

Pros:
* Very low credit risk due to U.S. government backing.
* Guaranteed minimum growth for the typical 20-year term.
* Exemption from state and local taxes.

Cons:
* Limited liquidity—must hold at least 12 months; early redemption penalties apply within five years.
* Subject to federal income tax upon redemption.
* Annual purchase limits can restrict larger investments.

Key takeaways

• Series EE bonds are safe, government-backed savings bonds guaranteed to at least double in value over about 20 years.
• They offer state and local tax-exempt interest and can earn interest for up to 30 years.
• Minimum purchase is $25; annual electronic purchase limit is $10,000.
• Bonds must be held at least 12 months; redeeming within five years costs three months’ interest.
• Available to a wide range of U.S. residents and purchased through the U.S. Treasury (TreasuryDirect for electronic bonds).