{
  "slug": "ibond-vs-cd",
  "title": "I Bond vs. CD Calculator",
  "heading": "I Bond vs. CD Return Comparison Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/ibond-vs-cd",
  "summary": "Compare after-tax, after-inflation returns of Series I savings bonds against a CD.",
  "description": "I bonds pay a fixed rate for the bond's 30-year life plus a variable rate that resets every six months based on inflation (CPI-U), so their yield rises when inflation runs hot and falls when it cools. CDs pay a locked-in nominal rate regardless of what inflation does, and unlike I bonds, CD interest is taxable annually at both federal and state levels the year it's earned (I bond interest is federal-only and can be deferred until redemption or maturity). This calculator estimates total return for both over a chosen holding period, applying your tax rate correctly to each (I bond interest deferred and taxed once at the end versus CD interest taxed every year), and factors in the I bond's 3-month interest penalty if redeemed before 5 years, so you can see which actually leaves more in your pocket for your specific horizon and tax situation.",
  "formula": "I bond composite rate = fixed rate + 2×semiannual inflation rate + fixed×inflation rate (approximated as fixed + inflation for simplicity here). CD after-tax value = principal × (1 + rate×(1−tax))^years. I bond after-tax value = principal × (1+composite)^years, taxed once at redemption; penalty of last 3 months' interest applies if redeemed under 5 years.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=ibond-vs-cd",
  "inputs": [
    {
      "id": "amount",
      "label": "Amount to invest",
      "kind": "number",
      "hint": null,
      "default": 10000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "iBondFixedRate",
      "label": "I bond fixed rate",
      "kind": "number",
      "hint": null,
      "default": 1.3,
      "unit": "%",
      "min": 0,
      "max": 5
    },
    {
      "id": "inflationRate",
      "label": "Expected annual inflation component",
      "kind": "number",
      "hint": null,
      "default": 3,
      "unit": "%",
      "min": 0,
      "max": 10
    },
    {
      "id": "cdRate",
      "label": "CD annual percentage yield",
      "kind": "number",
      "hint": null,
      "default": 4.5,
      "unit": "%",
      "min": 0,
      "max": 8
    },
    {
      "id": "years",
      "label": "Holding period",
      "kind": "number",
      "hint": null,
      "default": 5,
      "unit": "years",
      "min": 1,
      "max": 30
    },
    {
      "id": "taxRate",
      "label": "Combined marginal tax rate",
      "kind": "number",
      "hint": null,
      "default": 28,
      "unit": "%",
      "min": 0,
      "max": 50
    }
  ],
  "outputs": [
    {
      "id": "difference",
      "label": "I bond advantage over CD (after tax)",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "iBondValue",
      "label": "I bond value after tax",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "cdValue",
      "label": "CD value after tax",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "composite",
      "label": "I bond composite rate used",
      "format": "percent",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Amount to invest: 10000 $",
      "I bond fixed rate: 1.3 %",
      "Expected annual inflation component: 3 %",
      "CD annual percentage yield: 4.5 %",
      "Holding period: 5 years",
      "Combined marginal tax rate: 28 %"
    ],
    "outputs": [
      "I bond advantage over CD (after tax): -$41",
      "I bond value after tax: $11,687",
      "CD value after tax: $11,728",
      "I bond composite rate used: 4.30%"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter amount to invest ($).",
      "Enter i bond fixed rate (%).",
      "Enter expected annual inflation component (%).",
      "Enter cd annual percentage yield (%).",
      "Enter holding period (years).",
      "Enter combined marginal tax rate (%).",
      "Read your i bond advantage over cd (after tax) on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "amount": 6000,
        "iBondFixedRate": 0.78,
        "inflationRate": 1.7999999999999998,
        "cdRate": 2.6999999999999997,
        "years": 3,
        "taxRate": 17
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "amount": 10000,
        "iBondFixedRate": 1.3,
        "inflationRate": 3,
        "cdRate": 4.5,
        "years": 5,
        "taxRate": 28
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "amount": 16000,
        "iBondFixedRate": 2.08,
        "inflationRate": 4.800000000000001,
        "cdRate": 7.2,
        "years": 8,
        "taxRate": 45
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why is I bond interest often better after tax than a CD's headline rate suggests?",
      "a": "I bond interest is exempt from state and local income tax and federal tax can be deferred for up to 30 years until redemption, letting the full pretax amount compound in the meantime. CD interest is taxed as ordinary income every single year it's credited, even if you never touch the money, which drags down the effective compounding rate year over year."
    },
    {
      "q": "What's the catch with I bonds?",
      "a": "You can't redeem an I bond in the first 12 months at all, and redeeming between 1 and 5 years forfeits the last 3 months of interest as a penalty. There's also a $10,000 per person per calendar year purchase limit (plus up to $5,000 more via tax refund), so I bonds don't work for large lump sums."
    },
    {
      "q": "Does the I bond rate ever go negative?",
      "a": "No. The Treasury Direct formula floors the combined rate at the fixed rate even if the inflation component goes negative, meaning your I bond's value never declines in nominal terms, unlike some other inflation-linked instruments."
    },
    {
      "q": "Which is simpler for a short-term emergency fund?",
      "a": "A CD or high-yield savings account, because of I bonds' 1-year lockup and 5-year penalty window. I bonds work better as a multi-year inflation hedge for money you're confident you won't need before year five."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/ltcg-zero-bracket-harvesting",
    "https://www.revenuelab.fyi/toolbox/asset-location-tax-efficiency",
    "https://www.revenuelab.fyi/toolbox/tax-loss-harvesting-benefit"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — I Bond vs. CD Calculator (https://www.revenuelab.fyi/toolbox/ibond-vs-cd)"
}