What Is an EE Savings Bond?


Quick Answer

EE savings bonds are fixed rate bonds that earn interest for up to 30 years, reports the U.S. Department of the Treasury. They are available in electronic versions only through the TreasuryDirect.gov website, in any amount from $25 to $10,000, as of 2015. Interest from EE bonds is subject to federal tax but not state or local taxes, and the federal government waives the tax if the purchaser uses the bond interest for higher education expenses.

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Full Answer

EE savings bonds sold before 2005 cost less than their value and had variable interest rates, but consumers buying these bonds after April 2005 must pay face value and have fixed interest rates set every May 1 and Nov. 1, explains the U.S. Department of the Treasury. Buyers can cash in EE bonds after one year, but if they cash them in within the first five years after purchase, they lose the final three months' interest as a penalty. Consumers can buy EE bonds online by creating a TreasuryDirect account or by working out payroll direct deposits.

Paper EE bonds are no longer available, according to the U.S. Department of the Treasury. If a consumer wants to give an EE bond as a gift, he must stipulate the recipient at the time of purchase, and TreasuryDirect transfers the bond from one account to another and notifies the gift recipient by email. Owners of EE savings bonds cannot sell or transfer them to others.

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