What is the current I-bond composite rate?

I bonds issued May 1, 2026 through October 31, 2026 earn a 4.26% composite for their first six months, combining a 0.90% fixed rate and a 1.67% semiannual inflation rate (Fiscal Service, May 1, 2026). The next announcement is November 1, 2026. Type the rate that applies to the bond you will actually buy — do not freeze a blog number.

Can a couple buy $20,000 of I bonds?

Yes. The $10,000 electronic cap is per SSN (or EIN). Each spouse with a TreasuryDirect account can buy $10,000. Entity and qualifying-trust accounts have their own $10,000. The old extra $5,000 paper path through IRS Form 8888 is gone as of 2025.

Home · Learn · I bonds vs T-bills

Cash · 1–5 year money

I bonds vs T-bills vs HYSA: three jobs, not three APYs

Q: Can I bonds be my emergency fund?

No. TreasuryDirect will not let you redeem an I bond in the first 12 months. If you cash before five years you also lose the last three months of interest. Tuesday money belongs in an FDIC HYSA, not in a savings bond.

Q: What is the 2026 I-bond purchase limit?

You may buy up to $10,000 of electronic Series I bonds per Social Security number or EIN per calendar year (31 CFR 363.52). Paper I bonds via a federal tax refund ended January 1, 2025. A couple can each buy $10,000. Gifts count against the recipient in the year they are delivered, not the purchaser.

Q: Are T-bills taxed by my state?

Interest on Treasury bills is subject to federal income tax and exempt from state and local income tax (31 U.S.C. § 3124). HYSA interest is taxed by both. That is why a T-bill can beat a similar HYSA APY in California or New York after tax.

Q: Do I bonds have a three-month penalty?

Yes, if you cash in less than five years. You keep the bond’s earlier interest and forfeit the last three months. Example from TreasuryDirect: cash at 18 months, you are paid 15 months of interest. After five years there is no penalty. After 30 years the bond stops earning.

Q: When do T-bills beat a HYSA?

When you know the date you need the money, you can hold to maturity (or accept secondary-market price risk), and your state tax rate is high enough that the exemption outweighs any APY gap. Match bill tenor to the date. Do not T-bill rent due Friday.

Q: When do I pay tax on I-bond interest?

Federal income tax: you may report each year or wait until you redeem (or the bond matures). State and local income tax: no. Qualified higher-education use can exclude interest if you meet IRS Publication 970 tests. T-bill discount is ordinary federal interest in the year the bill matures.

Cash you will need in one to five years is not an emergency fund and not a stock index. An I bond is inflation-linked, slow, and capped. A T-bill is a dated Treasury discount that skips state tax. A HYSA is Tuesday money. Google “best cash rate” treats them as flavors of 4%. They are a fork.

Updated 2026-09-08 · 10 min read · Educational, not tax or investment advice. Run the I-bond vs T-bill vs HYSA calculator with your composite, APY, and discount. Defaults are labeled examples, not today’s auction.

Three tools, three jobs

	HYSA	T-bill	I bond
Job	Tuesday money	A known date 4–52 weeks out	Inflation sleeve you can leave 1–5+ years
Liquidity	Same day / few days	Hold to maturity or sell	Locked 12 months
Early-exit cost	None	Secondary-market price	Last 3 months of interest if cashed before 5 years
2026 size cap	FDIC $250k per depositor per bank	Auction noncompetitive is not a household constraint	$10,000 electronic / SSN / calendar year
Federal tax	Ordinary, each year	Ordinary, year of maturity	Ordinary; defer until redemption if you want
State / local tax	Yes	No (31 U.S.C. § 3124)	No
Rate	Bank can change APY tomorrow	Locked for that bill’s tenor	Fixed rate for 30 years + inflation that resets every 6 months

People google “I bonds vs HYSA” in a rate-chase mood. The 12-month lock is the whole product. If the money might be rent, a deductible, or a job-loss month, it does not belong in TreasuryDirect.

Worked slice

$10,000 for 24 months, 5% state

Example rates, not a live feed: I-bond composite 4.26%, HYSA 4.00% APY, 26-week T-bill 4.10% discount. Federal 22%. I-bond path applies the 3-month penalty (cash at 24 months). After tax: I-bond $10,597, HYSA $10,596, T-bill $10,684. The T-bill wins the 24-month cash race. The I-bond is not a yield bug — it is an inflation sleeve with a lock.

The usual “no”

Need it in nine months

I-bonds are unredeemable. Accrued value is a museum piece until month 12. HYSA or a T-bill that matures on the date. If your “emergency fund” is in I-bonds, you have a 1-year CD with extra paperwork and a worse Saturday.

TreasuryDirect numbers (cite, then type yours)

Item	Rule	Source
New-issue composite May–Oct 2026	4.26% for the first six months	Fiscal Service, May 1, 2026
Fixed rate in that composite	0.90% for the 30-year life of that issue	Same release
Semiannual inflation piece	1.67% (CPI-U Sep 2025 → Mar 2026)	Same release
Next rate announcement	November 1, 2026	TreasuryDirect schedule
Electronic purchase cap	$10,000 per SSN or EIN per calendar year	31 CFR 363.52
Minimum electronic purchase	$25, to the penny	TreasuryDirect
Redeem	After 12 months	TreasuryDirect I-bond page
3-month penalty	If cashed before 5 years	Same
Paper via tax refund	Ended January 1, 2025	TreasuryDirect / Form 8888

Composite formula: fixed + (2 × semiannual inflation) + (fixed × semiannual inflation). Floor at 0% — deflation cannot pull the combined rate negative. The 4.26% figure is the new-issue composite for May 1–October 31, 2026. A bond you bought in 2022 has a different fixed rate and a different current composite. The calculator does not scrape Treasury. You type the rate that applies.

The $10,000 cap is a calendar, not a suggestion

One Social Security number, one calendar year, $10,000 of electronic I bonds. A married couple with two accounts can buy $20,000. A qualifying trust or a real business EIN can buy another $10,000 — Treasury can ignore empty LLCs. Gifts count against the recipient in the year they are delivered.

The extra $5,000 of paper I bonds you used to elect on a tax refund is gone. As of January 1, 2025, I bonds are electronic only. Guides that still mention Form 8888 as a live add-on are stale. If cash is $25,000, the I-bond path is $10,000 in I bonds plus $15,000 in HYSA or T-bills — the calculator splits it that way.

T-bill discount is not APY

Bills are sold at a discount. Treasury’s price formula is Price = Face × (1 − (discount rate × days) / 360). A 26-week bill uses 182 days. The coupon-equivalent (investment) rate is higher than the discount. The calculator converts discount → period return → a roll over your horizon at the same example rate. Real auctions change every week. Type the high rate from the tenor you will actually buy. Do not paste last month’s headline as if it were a CD.

T-bill interest is the discount, taxed as ordinary federal income in the year the bill matures, even if you immediately roll. State and local income tax: none. That exemption is the product in a 5–13% state. In a 0% state the HYSA vs T-bill fork is mostly liquidity and whether you will actually hold to maturity.

HYSA is the emergency fund. Full stop.

FDIC (or NCUA) coverage, no lock, APY can drop, 1099-INT every year, state tax yes. That is the right wrapper for the 3–12 month sleeve and for sinking funds you might need early. CDs and T-bills can hold dated money (property tax, a closing, tuition). See HYSA vs CDs for the bank-side pair; this page is the Treasury-side pair.

Do not skip a 401(k) match to fill I bonds. A 100% match is not a 4.26% composite. Order of operations still starts at the match — never skip it.

Free tool

I-bond vs T-bill vs HYSA calculator

User-entered composite / APY / discount, $10k cap, 12-month lock, 3-month penalty, state-tax toggle, bars, shareable URL.

PayPal

Park-the-cash sequence

12 steps: split the pile, open TreasuryDirect before you need it, cap calendar, ladder the bills, tax lot at redemption.

Questions

Can I bonds be my emergency fund?

No. 12-month lock. 3-month penalty before five years. HYSA for Tuesday.

What is the 2026 I-bond purchase limit?

$10,000 electronic per SSN or EIN per calendar year. Paper tax-refund path ended January 1, 2025.

What is the current I-bond composite?

4.26% for May 1–October 31, 2026 issues (0.90% fixed). Type yours. Next print is November 1, 2026.

Are T-bills taxed by my state?

No. Federal yes, state/local no. HYSA is both. Toggle it in the calculator.

Do I bonds have a three-month penalty?

If cashed before five years, you lose the last three months of interest. After five years, none.

When do T-bills beat a HYSA?

Known date, hold to maturity, high state tax. Match tenor to the date. Not rent-due-Friday money.

Can a couple buy $20,000?

Yes — $10k per SSN. Gifts count against the recipient when delivered. No more $5k paper add-on.

When do I pay tax on I-bond interest?

Federal at redemption (or elect annual). Never state income tax. Education exclusion is Pub. 970, not a slogan.

Keep reading

Educational only. Confirm TreasuryDirect, 31 CFR 363.52, 31 U.S.C. § 3124, and your 1099-INT before you move money. Written by Thomas Sanders.