Price inflation reduces the purchasing power of future bond coupon payments and of the principal that you eventually get back when the bond matures. This last feature distinguishes I bonds from the more common form of inflation hedged bonds called Treasury Inflation Protected Securities. Buy a bond or bond fund, and you’re taxed each year as the coupon payments are made. As with all government issued bonds, I Bond interest is exempt from all state and local taxes when liquidation occurs. The current fixed rate for I bonds purchased between November 2018 and May 2019 is now 0.5%, the highest level since 2008.

Source: Forbes February 16, 2019 14:37 UTC