An I bond, also known as an “Inflation Indexed Bond”, is one type of US savings bonds available. Like the other type EE bond, one benefit of I bonds is that these are not subject to local and state taxation. In addition, interest charge is put off until you cash in the bond. There is even a possibility of not having to pay any interest at all under certain circumstances.
I bonds can be either be purchased electronically or on paper. The convenience of acquiring it electronically is that you can pay for it in whatever amount you want ranging from $25 minimum to a maximum of $5,000. If you choose you purchase I bonds on paper, you would have to pay in certain denominations: $50, $75, $100, $200, $500, $1,000, or $5,000. You could acquire I bonds worth up to $5,000 each year. Both electronic and paper I bonds are sold at face value, unlike the EE paper bonds which are sold at half their face value. This implies that for a $500 I bond, you would have to pay $500 as well. Despite that, one great thing about I bonds is that rate of profit is fail-safe greater than the rate of inflation.
I bonds, like the EE bonds, impose an early redemption penalty. Your interest for the three latest months shall be forfeited if you would redeem the bond within the first five years of purchase. To avoid this, it is advisable for you wait for five years before redeeming the bonds.