When you cash in I Bonds, you will have to pay income taxes on the amount of accrued interest on the bonds, but will not have to pay taxes on the principal amount of the bonds. I bonds earn interest until either you cash in the bond, or the bond reaches 30 years old.
The interest rate on your bonds depends on when you purchased them, as the interest rate for bonds issued are set every May 1 and November 1. For example, right now the rate on Series I Savings Bonds issued from May 1, 2024 to October 31, 2024 is 4.28%.
You can see the historical interest rate for bonds issued on the Treasury Direct website, located here: Treasury Direct I bond Interest Rates
Once you calculate how much interest has accrued on your bonds, then you will know the additional income that you will be paying income tax on. From there, you would need to know what your current tax bracket is - so for example, if you are generally in the 24% tax bracket, you can plan to pay 24% taxes on the interest when you cash the bonds in. You will want to pay attention to when the tax brackets increase, in the event that this additional income pushes you into a higher tax bracket and therefore you are paying taxes on the additional income at a higher tax rate. You can find the 2024 tax brackets on our TurboTax website, at TurboTax Tax Bracket Article
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