A U.S. savings bond with an annual interest rate that reflects the combined effects of a fixed rate and a semiannual inflation rate. This is designed to protect the purchasing power of the bond’s principal. In other words, you will never lose money on I Bonds. Interest is added to the bond monthly and paid at redemption. I Bonds are sold in denominations of $50 to $5,000, and you can purchase up to $5,000 worth of bonds each year through a TreasuryDirect account and $5,000 in paper bonds. They are sold at face value, which means you pay $50 for a $50 bond. They mature in 30 years, but if you hold them for five years, there is no penalty for redeeming them. If you redeem them within the first five years, you will forfeit the three most recent months’ interest. I Bonds are exempt from state taxes (except for estate or inheritance taxes). Interest earnings are subject to federal income tax, except you may be able to avoid paying taxes if the I Bonds are used to pay for education.