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Buying Series I Savings Bonds

Guess What Tax Stars? * * *


As most of you are aware, I switched software companies this year. I am still learning all the new features of the software, but today I discovered it gives taxpayers the option to buy Series I Savings Bonds with their tax refund, which are fixed rate government bonds.


Those of you with IRA's may have heard me mention placing your IRA's on bonds when you see the stock market is showing itself unstable. These are good things to buy your small children, grandchildren, or yourself. Especially for those adults who have not been earning quarters for their social security.




What's an I bond?

A Series I savings bond is a security that earns interest based on both a fixed rate and a rate that is set twice a year based on inflation. The bond earns interest until it reaches 30 years or you cash it, whichever comes first. Today the interest rate is 7.12%


Who may own an I bond?

Individuals

Yes, if you have a Social Security Number and meet any one of these three conditions:

  • United States citizen, whether you live in the U.S. or abroad

  • United States resident

  • Civilian employee of the United States, no matter where you live

To buy and own an electronic I bond, you must first establish a TreasuryDirect account.


Children under 18

Yes, if they meet one of the conditions above for individuals. Information concerning electronic and paper bonds:

  • Electronic bonds in TreasuryDirect. A child may not open a TreasuryDirect account, buy securities in TreasuryDirect, or conduct other transactions in TreasuryDirect. A parent or other adult custodian may open for the child a TreasuryDirect account that is linked to the adult's TreasuryDirect account. The parent or other adult custodian can buy securities and conduct other transactions for the child, and other adults can buy savings bonds for the child as gifts.

  • Paper bonds. Adults can buy bonds in the name of a child.

Trust, estate, corporation, partnership and some other entities

Electronic bonds (in TreasuryDirect): Yes Paper bonds:

  • Trusts and estates: In some cases, Yes

  • Corporations, partnerships, other entities: No

How can I buy I bonds?

Two options:

  • Buy them in electronic form in our online program TreasuryDirect

  • Buy them in paper form using your federal income tax refund

What do I bonds cost?

You pay the face value of the bond. For example, you pay $50 for a $50 bond. (The bond increases in value as it earns interest.)

Electronic I bonds come in any amount to the penny for $25 or more. For example, you could buy a $50.23 bond.

Paper bonds are sold in five denominations; $50, $100, $200, $500, $1,000


How much in I bonds can I buy for myself?

In a calendar year, you can acquire:

  • up to $10,000 in electronic I bonds in TreasuryDirect

  • up to $5,000 in paper I bonds using your federal income tax refund

Two points:

  • The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year

  • Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:

    • If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit

    • If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today's limit of $10,000.)

Can I buy I bonds as gifts for others?

Yes.

Electronic bonds: You can buy them as gifts for any TreasuryDirect account holder, including children.

Paper bonds: You can request bonds in the names of others and then, once the bonds are mailed to you, give the bonds as gifts.

How much in I bonds can I buy as gifts?

The purchase amount of a gift bond counts toward the annual limit of the recipient, not the giver. So, in a calendar year, you can buy up to $10,000 in electronic bonds and up to $5,000 in paper bonds for each person you buy for.


* * * * * Benefits * * * * * * *


1. Protection Against Inflation; I-bonds boast a built-in hedge against inflation.

2. Clear Tax Benefits; Since they’re issued by the Federal Government, I-bonds aren’t subject to state or local taxes. Additionally, the flexible tax reporting methods – accrual and cash-out – allow you to choose how you’ll be taxed on your interest income.

3. Long-Term Security; I-bonds are backed by the full faith and credit of the federal government.

4. Flexibility and Liquidity; Unlike regular Treasury bonds, corporate bonds, and some other fixed-income securities, Series I savings bonds are both flexible and liquid.

5. Educational Benefits; If you commit to using your I-bonds to fund certain educational endeavors, you may avoid federal taxation on your earnings.



Where to purchase:

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