Patriot and Series EE Savings Bonds
Some investors are confused about the differences between Patriot Bonds and Series EE savings bonds. Patriot Bonds are in fact Series EE U.S. savings bonds that were first issued in December 2001, with the intention of getting Americans to support anti-terrorism efforts after the September 11 attacks.
Aside from that intended purpose, there's essentially no difference between the two types of savings bonds except for the appearance of the words "Patriot Bond" on the face of those bonds.
Patriot Bonds were issued for just 10 years, from December 2001 through December 2011, and could be purchased in any amount, including any number of cents, from $25 to $10,000. That means you could buy one for, say, $25.01 or $8,763.
The United States Treasury told investors at the time Patriot Bonds were first issued that proceeds from the savings bonds would be deposited into the federal government's general fund and spent on anti-terrorism programs.
Only Patriot Bonds purchased through certain financial institutions were eligible for the Patriot Bond inscription. Other Series EE bonds, such as those bought through a payroll savings plan, were processed differently and through different vendors that didn't have access to the requisite printing equipment. So the only reason all of that series of bonds for those 10 years couldn't be Patriot Bonds was that the words couldn't be printed on some of them.
Patriot Bonds and all other Series EE bonds will accrue interest on the amount paid for the bonds (which for Patriot Bonds was half of the face value) for 30 years, and they were guaranteed by the U.S. government to double in value in no less than 20 years. If the bonds haven't accrued enough interest in 20 years to double in value, the Treasury provides a one-time payment to make up for the shortfall.
Patriot Bonds purchased before May 1, 2005, pay a variable interest rate that is subject to change every six months. Those that were purchased after that date pay the same fixed rate for at least the first 20 years.
Bonds bought from Nov. 1, 2019, through April 30, 2020, will have an interest rate of 0.1% for those first 20 years. The rate for saving bonds purchased during the following six months is announced on May 1 and Nov. 1 of every year.
Interest is compounded every six months. That means interest earned in the previous six months is added to the principal amount of the bond, and the next interest amount will be calculated using that new total.
The 0.1% interest rate on savings bonds has not changed since May 1, 2015, when it was 0.3%. In the six months starting on May 1, 2006, the interest rate was 3.7%, the highest rate since May 2005.
Cashing In Bonds
You can cash in a savings bond starting one year after it was issued. But if you cash in bonds within five years of the issuance date, you will forfeit the last three months of earned interest.
You must pay federal income tax, but not state or local taxes, on the interest you earned from the bonds. However, you can avoid federal income tax if you use your proceeds from the bonds to pay for a qualifying educational expense.
If you want, you may convert your paper Patriot Bonds into electronic bonds through the Smart Exchange program available at TreasuryDirect, or you can just hold on to them until you decide to cash them in.
At the end of 2011, the Treasury Department stopped offering paper Patriot Bonds and other paper EE savings bonds through financial institutions. The only way to buy non-electronic savings bonds is by paying for them with your income tax refund. These bonds can be bought only in increments of $50. And any amount of your refund that's not used to buy savings bonds will be mailed to you in the form of a check.
You can determine the current value of a Patriot Bond by entering information in the calculator at TreasuryDirect. You will have to provide the series (which is EE for all Liberty Bonds), the denomination (dollar amount), the serial number, and the issue date.
Treasury Direct. "Buying Series EE Savings Bonds." Accessed Jan. 29, 2020.
TreasuryDirect. "The Patriot Savings Bond." Accessed Jan. 29, 2020.
Internal Revenue Service. "Using Your Income Tax Refund to Save by Buying U.S. Savings Bonds." Accessed Jan. 29, 2020.