My previous posts covered buying I Bonds with your tax refund, buying I Bonds in a trust, buying I Bonds in your kid’s name, and buying I Bonds for your business. Let’s look at another way to buy I Bonds this time: buying them as a gift. For background on I Bonds in general, please read How To Buy I Bonds.
Gift Box and Delivery
You buy I Bonds as a gift in two stages: buying and delivering.
You must give the recipient’s name and Social Security Number when you buy a gift. The recipient doesn’t need to have a TreasuryDirect account at this time. Only a personal account can buy or receive gifts. A trust or a business can neither buy a gift nor receive a gift.
The bonds you buy as a gift go into a “gift box.” You can’t cash out the bonds stored in your gift box. This is analogous to you going to a store and bringing back the gift to your closet. The gift already has the recipient’s name permanently etched on it. You can’t steal the gift for yourself.
The recipient doesn’t know you bought a gift for them until you deliver the gift to them. This is analogous to bringing the gift from your closet when you visit family. The recipient must have a TreasuryDirect account now to receive the delivery. You’ll need the recipient’s account number to deliver a gift.
I Bonds stored in your gift box are in limbo. You can’t cash them out because they’re not yours. The recipient can’t cash them out either because the bonds aren’t in their account yet.
There’s a minimum wait of five business days between buying and delivering to make sure your bank debit clears. There’s no maximum stay in the gift box. You can pre-purchase gifts and wait to deliver them at a much later time. You can also choose to deliver gifts in bits and pieces as opposed to in one lump sum.
Purchase Limit
The principal amount of delivered gifts counts toward the $10,000 annual purchase limit of the recipient in the year of delivery. You can still buy gifts for others even if you already bought the maximum this year for yourself.
You can buy a maximum of $10,000 for any recipient in one purchase but there’s no limit on how many recipients you buy for or how many times you can buy for the same recipient in any calendar year. If you’d like, you can buy $10,000 worth of I Bonds for each of your 20 family members or you can make five separate purchases of $10,000 each for the same family member, all in the same calendar year.
If the recipient already received $10,000 in principal amount as gifts this year, buying additional I Bonds on their own will put them over their annual purchase limit. They’ll have to wait until they’re not receiving the maximum gifts.
Interest and Holding Period
Interest and the holding period start in the month of your purchase. If you pre-purchase gifts and wait to deliver them to the recipient at a later time, you still lock in the same fixed rate and inflation rate as other bonds bought in the same month. Interest earned while the gift savings bonds wait in the gift box belongs to the recipient. It’s exempt from state and local income tax.
The holding period for cashing out also starts right away. If five months have passed between the time of purchase and the time of delivery, the recipient only has to wait another seven months before they can cash out, as opposed to the full 12 months for freshly purchased bonds.
Gift to Kids
It’s not necessary to buy as gifts for your own kids under 18 unless you’re pre-purchasing for future years. As a parent, you can open a minor linked account in your account and buy directly in your kid’s name. See the previous post Buy I Bonds in Your Kid’s Name.
Buying I Bonds as a gift works when you buy for a grandchild or a niece or a nephew under 18. You only need the child’s name and Social Security Number when you buy the gift but you’ll need the child’s TreasuryDirect account number before you can deliver the gift. The child’s parent needs to have an account for themselves first and then open a minor linked account for the child under the parent’s account.
When Gifts Are Useful and When They Are Not
If you’re thinking of “borrowing” other people’s names and Social Security Numbers to buy more I Bonds as gifts but keep the bonds for yourself, it doesn’t work. Only the named recipient can cash out the bonds. If you don’t deliver them, the bonds stay in your gift box, and neither you nor the specified recipient can cash them out. After you deliver the gift bonds, it’s the recipient’s money, and they can do whatever they want with the bonds.
If you’re thinking of letting others buy I Bonds as gifts for you to double up the $10,000 annual purchase limit, it doesn’t quite work either. Gifts delivered to you count toward your annual purchase limit. If you receive the maximum in gift bonds for the year, buying additional bonds in the same calendar year will put you over the limit.
Buying I Bonds as a gift works when you want a family member to have some I Bonds but they don’t have spare cash. It works the same as giving them money and letting them buy themselves.
Pre-Purchase/Frontload
It also works to a limited extent if you think the high interest rates on I Bonds are only temporary. You can buy a gift for your spouse and hold it in your gift box. Have your spouse do the same for you. Wait to deliver the gift to each other in a future year. The older gift bonds will have earned the high interest rates in the years past and they have aged enough for immediate cashout.
We’re buying each other a gift this year to keep undelivered in the gift box in addition to our normal purchases. If the interest rate is still good next year, we’ll deliver the gift and buy a new gift in the gift box. If the interest rate isn’t good anymore, we’ll skip the purchase, deliver the gift, and cash out immediately.
Don’t Forget About Undelivered Gifts
As with physical gifts, most gifts are purchased and delivered in short order. If you hold gifts in your closet for a long time, you may forget that you bought the gifts in the first place. If you’re intentionally pre-purchasing gifts to take advantage of temporarily high interest rates, tell the recipient you’re holding a gift. Set recurring calendar reminders to tell yourself and the recipient you still have undelivered gifts in the gift box.
Remember that gifts are in limbo until they’re delivered.
Unexpected Death
You can include a second owner or a beneficiary for the I Bonds you buy as a gift. If the gift recipient dies before you deliver the gift, the designated second owner or beneficiary will inherit your gift. You can’t name yourself as the second owner of the gift but you can name yourself as the beneficiary of the gift. The recipient can change the second owner or the beneficiary after you deliver the gift. See How to Add a Joint Owner or Change Beneficiary on I Bonds.
If you die before you deliver the gift, the gift still belongs to the recipient. Whoever handles your affairs after your death should notify the recipient that you had an undelivered gift for them. Then the recipient can claim it through TreasuryDirect. Again, it’s important that you tell someone about the gift if you’re going to hold it undelivered. If no one knows you bought a gift, the gift will be in limbo.
Gift Tax Form 709
There’s no tax for receiving gifts. Gift tax is on the gift-giver.
Buying I Bonds as a gift counts as a completed gift in the year of the purchase (not the year of the delivery). There’s no limit on how much you can give as gifts to your spouse (unless the spouse isn’t a United States citizen). Each person has an annual gift tax exclusion amount for “present interest” gifts to each non-spouse recipient, which is 16,000 in 2022 and $17,000 in 2023. If the total “present interest” gifts (in I Bonds and other forms) during the year from one specific giver to one specific non-spouse recipient go above this annual gift tax exclusion amount, you’re required to file a gift tax return on IRS Form 709.
The gift tax annual exclusion amount for gifts to a non-spouse recipient is $0 for “future interest” gifts. You’re always required to file a gift tax return when you give “future interest” gifts to anyone except your spouse. It’s not clear to me whether the I Bonds you buy this year as a gift but hold for delivery in a future year count as a “present interest” gift or a “future interest” gift. To avoid ambiguity in determining whether it’s a “present interest” gift or a “future interest” gift, only give gifts to your spouse or deliver all gifts to non-spouse recipients within the same calendar year.
Unless you’re also giving the same non-spouse recipient gifts in other ways, buying and delivering $10,000 worth of I Bonds as a gift in the same calendar year falls below the annual gift tax exclusion amount, which doesn’t trigger the requirement to file the gift tax return.
If you’re required to file a gift tax return, it’s separate from the federal income tax return. The gift tax return goes to a special address. The typical consumer-grade tax software packages such as TurboTax and H&R Block software don’t support filling out a gift tax return. You’ll have to go to a tax professional or fill out the gift tax return on your own.
Having to file a gift tax return on Form 709 doesn’t mean you’ll pay gift tax out of pocket. Most people just use up part of their lifetime estate and gift tax exemption amount, which is more than $12 million in 2022. However, after you file the gift tax return once, you’ll have to keep track of how much of your lifetime estate and gift tax exemption amount you already used. See IRS Instructions for Form 709 if you decide to give gifts that will require a gift tax return.
Avoid Mistakes
Although TreasuryDirect has an official video walkthrough for how to buy a gift, it’s very easy to make a mistake if you follow the video when you’re buying a gift for the first time. I read many reports from people intending to buy a gift but ending up buying bonds for themselves.
It’s easier if you follow these steps when you’re buying a gift for the first time.
Add Registration
Click on ManageDirect in the top menu. Then click on the link “Update my Registration List.”
You’ll see a list of existing registrations in your account. Click on “Add Registration” to create a new one.
The radio buttons at the top show the registration types.
- Sole Owner means the gift recipient alone, without a second owner or a beneficiary.
- Primary Owner means the gift recipient with another person as the second owner.
- Beneficiary means the gift recipient with another person as the beneficiary.
If you choose Primary Owner or Beneficiary, enter the gift recipient as the First-Named Registrant and the second owner or the beneficiary as the Second-Named Registrant. You need the Social Security Number of both the gift recipient and the second owner or the beneficiary. You can’t name yourself as the second owner but you can name yourself as the beneficiary.
Make sure the spelling of the recipient’s name matches exactly what the recipient has or will have on their TreasuryDirect account. If the recipient has their full middle name on their account, you also include their full middle name. If the recipient only has their middle initial or no middle initial, you do the same in your gift registration. A mismatch between the names can cause a problem when you deliver the gift.
Check the box “This is a gift.” After you click on Submit, the new combination will be added to your list of registrations. You will use this registration when you buy the gift.
You only need to do this once per gift recipient.
Place Gift Order
Now click on BuyDirect in the top menu.
Select “Series I.”
This is important. Use the dropdown to select the gift registration. The name of your gift recipient should appear first, for instance, “Gift Recipient POD My Name.”
Now enter the purchase amount and the rest of the information.
Pay attention to the registration information on the final purchase review page and make sure the purchase is for the intended gift recipient before you click on Submit.
Deliver Gift
See a walkthrough in Deliver I Bonds Bought as a Gift in TreasuryDirect. You need the gift recipient’s TreasuryDirect account number. If they don’t have a TreasuryDirect account, they need to open an account to receive the gift delivery even if they’re not buying any savings bonds on their own.
If the gift recipient is a minor, a parent needs to open a Minor Linked Account for the minor under the parent’s account (see Buy I Bonds in Your Children’s Names). The parent needs to open an account for themselves before they can open the account for the minor even if the parent isn’t buying any bonds.
Remember to check with the recipient how much they are planning to buy themselves this year because delivering gifts to them counts toward their annual purchase limit.
There’s no way to pre-schedule delivery for a future date. You’ll have to log in every time you’d like to deliver a gift. If you’re keeping undelivered gifts in your gift box, set calendar reminders for yourself and the recipient to make sure you don’t forget the undelivered gifts.
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Dan A says
Just keeps getting better! I learned about I bonds from you, and now you published this little bonus factoid, allowing us to do another $20K:
“You can buy a gift for your spouse and hold it in your gift box. Have your spouse do the same for you. Wait until interest rates drop and the two of you don’t buy I Bonds anymore. Then you can deliver the gift to each other. The older gift bonds earned the high interest rates in the years past and they have aged enough for immediate cashout.”
Thank you.
Paul Stifel says
If you buy $10K in I-Bonds as a gift, but don’t deliver it for a year, the bond will be worth more than $10K at delivery. Will that put the recipient over their limit, or is the limit based on the original face value of the bond?
Harry Sit says
Based on the original face value.
Steve says
What happens if you die or become mentally incompetent and forget to give them, ever. Seems like they could die never knowing there is a pile of money waiting for them.
Obviously, it can’t be a surprise gift.
Harry Sit says
That’s a risk. I’ll add a section on not forgetting about undelivered gifts.
Daniel M. says
What about tax consequences of doing this — for the giver and the recipient?
I am thinking of buying $10K as a favor for a family member since I am more “computer literate,” with them paying me the $10K later.
Harry Sit says
Taxes on I Bonds work the same as you giving them $10k and having them buy themselves. They’ll pay tax on the interest when they cash out. $10k is below the annual gift tax exemption amount (unless you also gave the same family member other gifts in the same year). No gift tax forms are required for either the giver or the recipient.
If your $10k is really a loan you’re supposed to pay tax on a minimum interest rate for intra-family loans (and forgive the interest as a gift if you’d like).
Harry Sit says
Yes, assuming you haven’t gifted more than $14,000 to them in other ways.
Dave Cherne says
What happens to the I bond if your intended recipient dies before you can gift them the I bond?
Harry Sit says
As in the bonds you buy for yourself, you can designate a second owner or a beneficiary on the gift bond. The second owner or the beneficiary gets it if the gift recipient dies. The gift recipient can change the second owner or the beneficiary after you deliver the bond.
Micaela says
What happens to the I bonds if you die before you can deliver them?
Harry Sit says
The recipient claims them through TreasuryDirect? The undelivered gifts still belong to the recipient.
Donald says
I searched T.D. site for claiming undelivered gifts from the deceased giver, but found nothing. How would one do that?
HueyLD says
Per 31 CFR § 363.96(e):
“If the purchaser dies before delivering a gift bond to the recipient, the bond belongs to the owner named on the gift bond, notwithstanding any testamentary attempts to the contrary by the purchaser, or any state law to the contrary. We will hold the bond until we receive instructions from the owner named on the gift bond.”
So, the person named on the gift bond should call TD.
Hester says
Is buying I Bonds or delivering I Bonds considered a gift to the recipient? If I buy $50,000 for someone this year and deliver $10,000 to him each year over the next 5 years, do I need to file a gift tax return?
Harry Sit says
As soon as you buy, the recipient’s name and Social Security Number are attached to the bond, which can’t be changed. Interest will start accruing to the recipient at that point. I consider that as a gift. Because $50,000 is greater than the $16,000 annual gift tax exclusion amount, I will file a gift tax return.
Mr. Smith says
No, as you can only deliver 1 gift to him each year. Until it’s delivered he has not taken possession of the gift. In the same way, I could put $30,000 into an envelop and write my son’s name on the envelope, but I don’t have to do any gift tax return until I actually deliver the gift to him, it can sit in my dresser drawer for a decade and still no gift tax return.
Mark L says
Can I buy 30k in gift I bonds for myself, saving myself the trouble of finding someone to buy them for me or will that be considered a violation of the 10k per year limit? I don’t know if I can deliver them to myself over the next years.
Harry Sit says
I haven’t tried but I don’t think you can buy a gift for yourself.
Mark L says
Harry, you’re correct. When I attempted it, I got the following error message “You may not list yourself as the first-named registrant for this security and designate it as a gift.”
Martin Anderson says
I spoke with several Treasury Direct representatives who all told me that your statements regarding the $10k limit applying in the year of delivery are not correct. The limits apply in the year of purchase, not the year of delivery.
So, if you purchase $10,000 in I-bonds in 2015 as a gift for your child, and another $10,000 of I-bonds as a gift for the same child in 2016, you can deliver all $20,000 to your child in 2022. And those gifts DO NOT COUNT against your child’s limits in 2022. They counted against your child’s limits in 2015 and 2016, when you bought them.
There seems to be some ambiguity about this on TD’s web-site. On this page:
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm
It says:
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.
But, on this page:
https://www.treasurydirect.gov/indiv/research/faq/annualpurchaselimitchangeqa.htm#gifts
It says:
Do bonds I’ve bought as gifts through TreasuryDirect but have not yet delivered to the gift recipient apply against my annual limit?
No. Gift bonds are purchased in the name and SSN of the gift recipient. They do not count against your annual limit even if you have purchased them through your TreasuryDirect account but have not yet delivered them. Gift purchases in TreasuryDirect count toward the annual limit of the recipient in the year they are delivered.
It appears that the “No” answer and the first sentence is correct, but the second sentence is incorrect, at least according to the other Treasury Direct web-site that I quoted above and the multiple agents that I have spoken with.
Harry Sit says
You can choose to believe either the representatives or the Federal Regulations 31 CFR 363.52(b):
Ҥ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.”
https://www.ecfr.gov/current/title-31/subtitle-B/chapter-II/subchapter-A/part-363/subpart-C/subject-group-ECFR40621f7738442c1/section-363.52
Martin Anderson says
This may turn on what the regulations define as “delivered to the recipient.” The meaning of “delivered to the recipient” in the Treasury Regulations may be different than the meaning used in TreasuryDirect.com’s “gift box.”
In legal parlance, “delivery” generally refers to receipt of title. So, when you purchase a security as a gift for someone and use the registration in their name, they bonds may be “delivered” for the purpose of the Treasury Regulations at the time you click “submit.” Delivering them from your account to their account may also use the word “delivery,” but may not be what the Treasury Regulations are referring to.
Harry Sit says
Federal Regulations thought of that already.
“Delivery means moving a minimum amount of $25 (consisting of principal and proportionate interest) of a security held as a gift from the account of the purchaser to the account of the recipient.”
https://www.ecfr.gov/current/title-31/subtitle-B/chapter-II/subchapter-A/part-363#p-363.6(Delivery)
Michelle says
Can you can put the saving bonds when you are still holding it?
Keith says
This is from CFR 363 cut and pasted from their website current as of 20 Sep 2022. It sounds like Martin was transferring a bond as a gift and not purchasing a bond as a gift and then delivering it. I think Harry’s way is correct for purchasing a gift and Martin’s way works for transferring a bond as a gift (there is a subtle difference).
§ 363.26 What is a transfer?
(a) A transfer is a transaction to:
(1) Move a Treasury security, or a portion of a Treasury security, from one account to another within TreasuryDirect ®;
(2) Move a marketable Treasury security to or from a TreasuryDirect account and an account in the commercial book-entry system;
(3) Move a marketable Treasury security to a TreasuryDirect account from a Legacy Treasury Direct® account.
(b) Transfers of a specific type of security may be limited by the subparts that refer to that security.
(c) Gift delivery is not a transfer. A transfer does not include delivery of a gift savings bond from the donor to the recipient. This is referred to as a delivery.
[67 FR 64286, Oct. 17, 2002, as amended at 70 FR 57443, Sept. 30, 2005; 76 FR 18064, Apr. 1, 2011]
Martin Anderson says
“Delivered” and “delivery” are two different words. They sound similar, and even use many of the same letters, but they do not necessarily have the same meaning.
Martin Anderson says
If your interpretation is right then:
1. Bonds purchased as gifts count against recipient’s limit TWICE. Once in the year purchased and again in the year transferred (if different than the year purchased). So, if I buy a $10k I-bond for my child in 2015, it counts against his limit in that year, and he cannot purchase any I-bonds of his own in 2015. If I then “deliver” the bond from my gift box to my child’s account in 2022, it counts against his limit a second time, and he again cannot purchase any I-bonds. $20,000 of his limit has been used over two separate years, but he has only recieved $10,000 in I-bonds.
2. Bonds that have accrued interest and have exceeded the $10,000 annual limit cannot be transferred at all (or not all at once). For example, if I purchase a $10k I-bond as a gift for my child in 2015, and by 2022, it has earned $500 in interest, then it’s value is now $10,500. If there is a $10,000 limit on transferred I-bonds, I cannot transfer this I-bond to my child, or at least, I can’t transfer all of it in one year. I’d have to transfer $10k this year (if my child hasn’t already bought I-bonds for himself), and then transfer the remaining $500 next year.
Neither of these seem like they should be correct.
Have you spoken with anyone at Treasury to verify your interpretation? If so, can you supply me with their contact information?
Harry Sit says
You’re grasping at straws. Now explain this:
Ҥ 363.96 What do I need to know if I initially purchase a bond as a gift?
… …
(d) You may deliver the bond upon purchase, or you may hold the bond in your TreasuryDirect ® account until you are ready to deliver the bond to the owner named on the gift bond.”
https://www.ecfr.gov/current/title-31/subtitle-B/chapter-II/subchapter-A/part-363#p-363.96(d)
Purchase and deliver are two separate events. Now read 363.52(b) again.
The regulations only say the gift counts toward the recipient’s limit in the year of the delivery, not both in the year of the purchase and in the year of the delivery. The regulations are also clear in that only the principal amount is counted toward the $10,000 limit (see 363.52(a)).
When a reply from customer service conflicts with federal regulations, I choose to go with the regulations. As I said up front, you can make a different choice.
Martin Anderson says
Here’s the official response I received from Treasury to my email asking whether the date of purchase or date of gift box delivery controls the application of $10,000 limits:
————————————–
Hi Martin,
The purchase limit is per year. It will not matter if you deliver both bonds to the gift recipient in the same year. As you stated, they were purchased in different years. There will be no issues with the limits.
Treasury Services
Sasha says
Let me start by saying I an Not an expert of any kind. But I think the discrepancy is because you are discussing purchasing an I-bond for a minor vs gifting an I-bond to another adult. These are 2 different procedures: Transferring vs Delivering.
When purchasing an I-bond for a child, it is purchased on behalf of the minor child and is counted in the year purchased, it is not ‘Delivered’ on a future date. When you log into your account you can see it in your linked accounts. Once the child turns 18 yr old, you then ‘Transfer’ the account to him/her by De- linking the minor account once he/she has set up their own adult account. All money goes to him/her at that point (and there are no limit restrictions because nothing is being purchased) So the ‘Delivery’ date is not applicable in this situation.
As opposed to when you are purchasing an I-bond as gift for another adult, it must be ‘delivered’ to the recipient at some point after you purchase it , whether it be the minimum 5 days or the max of 30 yrs. It will stay in Your Gift Box until ‘delivered’ (‘delivery’ removes it from your gift box and puts into their account). From what I understand, the actual ‘Delivery’ date of the gifted I-bond is what is used to calculate the maximum allowed yearly purchase for the recipient.
Hope this helps to clarify.
Dan A. says
I am counting on Harry’s interpretation, as not only did my wife and I purchase 10K worth, but we each bought each other a gift (10K) this year, to deliver next year. Also bought 10K in the name of our living trust (which uses my soc#), so I don’t know what happens if Harry is incorrect.
David says
Harry’s interpretation of the CFRs makes sense, but I found in dealing with with some inherited bonds that the Treasury Direct agents did not follow either the CFRs or the procedures in the Treasury Direct site help, but had their own set of procedures. In my case I was happy with the outcome, but if not, I don’t know what my recourse would have been. I don’t see any appeal or escalation procedure listed, short of contacting the OIG. Some caution might be in order if you don’t enjoy battling bureaucracy.
Martin Anderson says
I’m now convinced that Harry’s interpretations of the CFRs is wrong. Delivery means one things. Delivered means another. If the Treasury had intended to use the meaning of the word “delivery,” it would have used that word, instead of “delivered.”
For the reasons that I’ve explained above, it seems very likely to me that “delivered” refers to something different than gift box “delivery.” Among other things, those two words are different, the web-site says the opposite of Harry’s interpretation, Harry’s interpretation would lead to the absurd results I detailed above, and everyone that I have spoken with and communicated with by email at Treasury has said the opposite of what Harry says.
I’m not sure why Harry is now quoting section 393.96. It uses the word “deliver,” which also isn’t specially defined in the rules, and which is different than the word “delivery” and the word “delivered.” And it says nothing about the purchase limits.
Based upon everything that I have been able to observe, it appears that the purchase limit is based upon the date of purchase and the registration used for that purpose, and not the year that the gift box delivery. It seems likely to me that the word “delivered” in the regulations refers to a transfer of a security from one registration to another. In other words, if you purchase an I-bond in **your name (using your social)**, and then transfer it to someone else, the I-bond counts against their limit in the year it is delivered to them, meaning the year that you put it in their name. That would also be consistent with the general, legal definition of delivery under the UCC in most U.S. States.
Having said that, it also appears that the system may not cross-check between accounts.
Thus, you may be able to get away with purchasing a $10,000 gift I-bond for your spouse in the same year that your spouse buys a $10,000 I-bond for herself. However, if Treasury finds out about it, they will cancel it.
The senior agents at TD that I spoke with have indicated that TD is inundated with I-bond purchases (presumably due to the high inflation rates and the broad promotion of I-bonds on the internet), and that Treasury does plan to audit the purchases in the last 12 months for duplicate social security numbers and to refund the duplicates.
David H says
I’ve read through the above. I’ve strained hard to at least attempt to think it means a gift counts in the year purchased, versus the year delivered. The more I try, the more I am swayed that all wording means year delivered and it is not even close. The following paragraph from the website seems non ambiguous and flows with the spirit of addressing the use of “gifts” purchased directly with treasury direct.
”
Do bonds I’ve bought as gifts through TreasuryDirect but have not yet delivered to the gift recipient apply against my annual limit?
No. Gift bonds are purchased in the name and SSN of the gift recipient. They do not count against your annual limit even if you have purchased them through your TreasuryDirect account but have not yet delivered them. Gift purchases in TreasuryDirect count toward the annual limit of the recipient in the year they are delivered.
”
That is clear as day that it counts in the year they are delivered as that paragraph would not address anything except the use of the treasury direct website’s terminology and use of purchasing “gifts” and delivering “gifts.”
This cements the usage in TD.
https://www.treasurydirect.gov/indiv/planning/plan_gifts.htm
”
Two points:
Keep the bonds in your account until you’re ready to deliver them.
You must hold the bonds in your TreasuryDirect account for at least five business days before you deliver them to the gift recipient. The five-day hold protects Treasury against loss, by ensuring the ACH debit has been successfully completed before the funds are moved.
When you deliver the bond to the recipient’s TreasuryDirect account, we send him or her an e-mail announcing the gift.
”
That’s my take. If that wording on the site is wrong, then so be it. It needs to be re-written. I-bonds have been a hot topic lately and I wonder how often those on the phone have had to deal with this specifically. This wording matters and if it was incorrect, I imagine they would change it asap. You would expect those that work for TD read through the FAQs at least once a year and go “wait a minute, that’s not right!” Either that or everything in their mind is tainted by personal purchases vs gifts.
Martin Anderson says
I addressed the quotations you posted from TD’s web-page in my discussion, above, when I also quoted from other portions of TD’s web pages that say the opposite.
As I noted above, TD responded to my email and confirmed that the limit is a calendar year limit per social. So, you can buy a $10k gift I-bond for person X in 2015, another $10k in 2016, another $10k on 2017, and then transfer all $30k (plus interest) in 2022. The purchases counted against the gift recipient in the year of the transaction.
I’ll be transferring $30,000 in I-bonds to a gift recipient in a few weeks and we’ll know for sure then.
Bob L. says
Hey, Martin Anderson. I would be interested in how that turned out. Any transfer yet?
Tim Vu says
How does recipient know that they have a gift from other people before they purchase the bond themselves? Say you buy someone a gift bond without telling them until years later, how do they know that so that the can purchase one themselves?
JM says
Martin Anderson made the hypothesis: “So, you can [maybe] buy a $10k gift I-bond for person X in 2015, another $10k in 2016, another $10k on 2017, and then transfer all $30k (plus interest) in 2022.”
Provided that person X had no other purchases, my guess is Treasury might allow this because the $10k tranches were each purchased in different years…
In other words, if you remove the “gifting” aspect of Martin’s scenario, the purchases would all be allowed because they didn’t violate the limit of $10k purchase per person per year. Martin was merely acting as a proxy for the eventual recipient.
That scenario would be quite different from buying $30k in gifts for person X all in 2021 and then wanting to deliver that amount to their account in 2022.
The latter case would violate the limit of $10k purchase per person per year, which could be the deciding factor in these cases.
In other words, Martin may be getting different answers from Treasury because he is not really talking about frontloading. He is more talking about transferring to someone who could have legally purchased the same amounts in the same years themselves without gifting.
Harry Sit says
My guess is also that a lump-sum delivery of gifts bought over several years will be allowed. While many of us are buying gifts between spouses, a generic gift recipient has no control over who buys gifts for them, when, how much, or when a gift-giver decides to deliver the gift. If grandma buys me a gift every year and she decides to hold the gifts until I graduate college and deliver them all at once, I can’t stop her. If 25 people from my extended family buy gifts for my wedding, I can’t expect them to coordinate with each other on who can deliver this year and who has to wait until next year. The best I can do is know how much purchase limit I have left after I receive the gifts. If I bought $1,000 already and I received $3,000 in gifts this year, I know I can still buy $6,000. If I already received $10k in gifts, I can’t buy any more. I think that’s what they meant by gifts counting toward the recipient’s purchase limit in the year of the delivery.
Obviously this opens up the “buy $30k deliver $30k” situation. Because TreasuryDirect is the only place that sells I Bonds and I’d like to stay on good terms for the long term, I’m not going to test the boundary with this unproven theory.
Martin Anderson says
Transfers were completed without any issues, and so it appears that Harry was incorrect.
MikeG says
Martin,
I don’t think you can compare what happened during a time when the Treasury was admittedly very lax about monitoring I Bond purchases and gifting by SS #.
There are reports over on the Bogleheads forum of people who bought I Bonds in one year and had I Bonds gifts delivered to them in the same year and not a word out of the treasury.
Given the record level of I bonds being purchased now, I would be careful to assume that what may have worked in the past will work in the future.
Marc says
Moreover, just because something happened doesn’t necessarily mean that thing is allowed. It could be sanctioned, or it could be an oversight. It’s unclear.
JM says
It may well be that $10k tranches bought in different years for someone who did not otherwise have other purchases may be tacitly allowed by the Treasury, because it does not violate their per-person annual limits.
Such a case is not really frontloading; it’s more just the gifting account acting as a proxy for the eventual recipient.
Harry Sit says
I already guessed the lump sum delivery will be allowed (April 16). If you don’t think the delivery used up their limit this year, have the recipient buy their $10k now.
Keith says
This is cut and pasted directly from CFR 363. Is sounds like a transfer and a delivery are two different transactions. One for a bond already held by a person and being transferred to another account (sounds like this is Martin’s case) and one for a bond being purchased specifically for the purchase of gifting it to another (What Harry’s article is about).
§ 363.26 What is a transfer?
(a) A transfer is a transaction to:
(1) Move a Treasury security, or a portion of a Treasury security, from one account to another within TreasuryDirect ®;
(2) Move a marketable Treasury security to or from a TreasuryDirect account and an account in the commercial book-entry system;
(3) Move a marketable Treasury security to a TreasuryDirect account from a Legacy Treasury Direct® account.
(b) Transfers of a specific type of security may be limited by the subparts that refer to that security.
(c) Gift delivery is not a transfer. A transfer does not include delivery of a gift savings bond from the donor to the recipient. This is referred to as a delivery.
[67 FR 64286, Oct. 17, 2002, as amended at 70 FR 57443, Sept. 30, 2005; 76 FR 18064, Apr. 1, 2011]
This is also copied from CFR 363 regarding the definition of delivery:
31 CFR 363.6 “Delivery”means moving a minimum amount of $25 (consisting of principal and proportionate interest) of a security held as a gift from the account of the purchaser to the account of the recipient.
Bob L says
What exactly is the penalty for overbuying in a year. Does the system stop you somehow. I dont want to be the first to try, but someone out there must have tried just to see. I know for a fact the system will not stop you from buying a gift for someone who is already maxed out for the year. Ive done it twice. So Im pretty sure the gift does not count in the year bought, just the year delivered to the named recipient.
Martin Anderson says
In some cases, the system will catch it and cancel the transaction. This seems to occur if you violate the limits using the same login.
However, agents at TD have told me that the system doesn’t monitor purchases by social, and thus if you violate the limits on two different accounts (such as buy buying $10k for yourself and then having your spouse buy a $10k gift for you), the system will not catch it. However, Treasury reserves the right to cancel excess purchases at a later time. So, you could order two $10k bonds for the same person today, only to find one of them cancelled in six months.
The three agents that I have spoken with have indicated that Treasury has been very lenient with the limits in the past, and generally ignored limit violations occurring across accounts.
However, they also indicated that Treasury is now inundated with purchases (billions of $) because of the higher rates and the broad publicity given to I-bond online, and they have heard that Treasury is planning to be more diligent about cancelling purchases that exceed the limits.
Since TD is a federal web-site, there is also the possibility of criminal penalties, though I suspect that would be reserved for someone who blatantly violated the rules, e.g., buying 100 $10k I-bonds for the same social using a series of fake accounts….
John Richter says
I did accidently purchase $10K in Ibonds for myself, at different times in the same year. The Treasury identified this in a few days and sent me an email notification of cancelation of my 2nd order. They send the money back to my bank. The system did not catch it at the time I put the order in.
Marc says
So I read this article with interest (pun intended) and was extremely impressed by the thought that went into it. It’s the most comprehensive discussion of the topic on the Internet, period. I’ve been reading I Bond articles online for weeks, and as far as I can tell, this is the only article that mentions you can go beyond the $40,000 limit per couple spanning two calendar years ($45,000 if you include the paper I Bond tax refund option) by gifting I bonds to a spouse and delivering it in a future year.
I’ve been following the debate in the comments section about whether the gift option is legitimate. My personal conclusion was that the author’s logic was 100% sound, but to confirm, I submitted the question to Treasury Direct. And unlike the commenter who disagreed, I got a response that confirmed that spouses who purchased up to the $10,000 limit in 2022 can also purchase Gift I Bonds for the other spouse, hold them in the Gift Box, and then deliver them in a future year which will then count towards the $10,000 I Bond limit of the recipient in that future year. In the meantime, the I Bond begins earning interest and the clock starts on the redemption calendar.
I have this response in writing and consider the strategy legit and confirmed.
Theoretically, I believe each spouse can also purchase a second I Bond valued at $6,000 to reach the gift tax limit of $16,000 for the year, and deliver that $6,000 bond in a subsequent year as well. This would bring the total up to $72,000 ($75,000! with the paper bond refund option), an amount no article or Treasury Direct mentions specifically but are within gifting and I Bond limits.
Marc says
*$77,000 not $75,000
Harry Sit says
Gifts to the spouse aren’t limited by the $16,000 annual exemption amount. If you’re willing to hold the gifts for many years even when the interest rate on I Bonds isn’t competitive with other alternatives anymore, you can buy a lot more than $16,000. I prefer to buy only $10,000.
Dunmovin says
I’m thinking that any gift buying for/between spouses may best done in mid-October when one knows the then current Ibond rate and can calculate the expected November 1st 6 month reset. This approach would allow one to have flexibility in only holding in gift box until January 1st (about 2 1/2 months) and then determining to do delivery OR do individual purchases (or gifts) for the following year. This latter approach would eliminate the longer gift box hold for those slightly nervous about lack of control and permit time to see about CD rates. Any thoughts? Thanks
Marc says
In my view, that logic applies even more to the mid-April timeframe just ahead. Waiting until mid-October misses out on 6 months of guaranteed 7.12% annualized interest when bank savings and CD rates are still around 1% or less. Even if inflation rises further by October and the I Bond rates goes up on November 1, you lock in the 7.12% for the first 6 months and the higher rate for the next 6 months instead of your cash is losing ground to inflation between now and then. You can always buy another gift in mid-October if you have the funds and want to push out the delivery by another year. And even if you don’t have the funds in the fall, you can always outright purchase those I Bonds at the November 1 rate after January 1 through mid-April 2023.
The whole point of I Bonds are to hedge inflation which is in full force right now. It seems illogical to not lock in another I Bond at current rates through gifting if you can. By mid-October, we will have likely seen multiple interest rate hikes by the Fed, designed to slow the economy and curb inflation, and even if bank and CD rates lag as they usually do and don’t rise accordingly, the longer you wait, the more likely it is that inflation moderates and the I Bond rate backslides. And if inflation worsens, and I Bond rates increase, you aren’t missing you. You get the current 7.12% for 6 months and the newer higher rate as well for the following 6 months.
Dunmovin says
MARCH 9, 2022 AT 9:06 AM
I’m thinking that any gift buying for/between spouses may best done in mid-October when one knows the then current Ibond rate and can calculate the expected November 1st 6 month reset. This approach would allow one to have flexibility in only holding in gift box until January 1st (about 2 1/2 months) and then determining to do delivery OR do individual purchases (or gifts) for the following year. This latter approach would eliminate the longer gift box hold for those slightly nervous about lack of control and permit time to see about CD rates. Any thoughts? Thanks
Harry Sit says
Agree with Marc. If you’d like to wait until mid-April, fine, it’s only another month, but I don’t think you’ll learn anything new. The next rate will still be high, possibly higher than the current 7.12%. Say it’s 8%, but you’ll get it in the next cycle anyway if you buy now. If you wait until October and you see the next rate will be 10%, now what? You already missed the 7.12% by waiting. Do you give up on 8% and start with 10%? Early purchases will eventually get all new inflation adjustments but late purchases won’t get the ones they missed.
MikeG says
Marc,
Would you be willing to post the entire question asked and response received (word for word) here?
Would be good to have that as additional backup. I intend to do the same thing outlined here in the coming days (purchased the limit last week for both my wife and I).
Thanks
Marc says
Mike,
Below is the word-for-word answer I received from Treasury Direct and below that is the question I asked.
Marc
Hello Marc,
Thank you for your inquiry.
To follow up to your question, gifting each other a bond would still count toward the annual limit however, not until the bond is delivered to the gift recipient’s account. Please remember once the gift bond is delivered, it will count toward the 2023 purchase limit.
Treasury Services
[THREAD ID:1-34Y0MBN]
—–Original Message—–
Sent: 1/24/2022 01:06:52 PM
To: Treasury.Direct AT fiscal.treasury.gov
Subject: Electronic EE and I Savings Bonds (TreasuryDirect)
Submitter: Marc Message: Good afternoon, My wife and I both purchased a $10,000 Series I Bond each in 2022 recently so we have reached our purchasing limit for ourselves for this year. Here’s my question: Can we both purchase another I Bond for each other in 2022 as a GIFT, hold it in our respective gift boxes without releasing it, and then DELIVER, transfer, it to each other in 2023 instead of waiting until 2023 to buy them ourselves? The reason for wanting to do this is to lock in the current high interest rate with a gifted I Bond while it sits undelivered in our respective gift boxes. The FAQs seem to be a little contradictory on this scenario so I wanted further clarification. Thanks in advance… Marc
MikeG says
Thanks Marc for posting your written communication with Treasury Direct. That is exactly what I was looking for and addresses the concern raised by Martin Anderson. There is no issue buying (front loading / pre-purchasing) another $10,000 in gift bonds for my wife (and she for me) with the plan to deliver those securities in 2023.
Thanks Harry for so clearly articulating this strategy.
Marc says
You’re welcome, Mike. I’ve read dozens of I Bond articles and all of them emphasize the $10,000 annual limit, many of them mention doubling up with a spouse, some of them mention doubling that by purchasing just after the new year, but none of them mention exceeding the $10,000 limit through gifting and delivery in subsequent years except for Harry. When I read this, I had to confirm it with Treasury Direct because I couldn’t understand why this wasn’t made clear on their site or mentioned in any of the many articles on the topic. It still amazes me Harry is the only one who went out of his way to point this out.
The only other nuance I would add is that my wife and I are not necessarily delivering the gift I Bonds in 2023 even though that’s the way I phrased the question. If the November 1 rate remains favorable, we will let our gift I Bonds ride and purchase more of our own I Bonds in January and hold off on delivering the Gift I Bonds to each other until 2024.
You may ask why, if we’re thinking that way, we don’t just purchase more gift I Bonds now if we have the cash and play out the gifting in additional years. Well, the Fed is actively tightening money supply in order to curb inflation. There are multiple interest rate hikes planned throughout 2022. There is a lot of focus right now on fixing supply chain issues which had a lot to do with triggering inflation in the first place. Eventually, inflation will moderate due to these steps, and there may even be a recession if the tightening goes too far. Inflation could more than moderate, it could tank (which wouldn’t necessarily be a bad thing for the economy but would be a bad thing for I Bind rates). The question becomes, how many years do you front load and hold gift I bonds in the gift box when the rates will come down, lowering the yield you get before you can deliver and redeem them.
The other issue is that if rates rise, a fixed rate for I Bonds, which is now 0%, may be reintroduced into future I bonds and that’s where you might be able to compound these bonds as an even better inflation hedge.
The best argument for buying more gift I Bonds than I did and holding them is that if you buy enough of them, you can create a laddered portfolio of I Bonds with likely decreasing but still attractive yields that you can deliver annually over the next few years to further hedge inflation and balance your other riskier stock market investments. I personally have diem this in the past with triple tax free municipal bonds, but munis haven’t recovered from the current low interest rate environment enough for me to go back to thst strategy. I’m not sure if Harry has written articles on laddering a portfolio with munis, but if not,t hey also might be helpful.
Marc
MikeG says
I agree Marc.
Just submitted our gift box purchases (intended release in 2023) – my wife as owner of the one I purchased with me as beneficiary and me as owner of the one she just purchased with her as the beneficiary. Very simple and straightforward. Like you, would consider leaving there and reloading again in 2023. Unless I do the following…
I am considering doing a second set of gift bond purchases (intended release in Jan of 2024). What I know for sure is if I hold these bonds to Dec 31, 2023, we will lock in the 7.12% annualized rate from 4/1/22 to 9/30/22 and the 9.60% annualized rate from 10/1/22 to 3/31/23 – total compounded interest of $853 over that 12 month period. Even if the I-Bond composite rates goes to 0% effective 4/1/23 and stays there for the rest of 2023, we would still earn the $853 on each $10,000 – which translates to an annualized rate of ~5.0% over the 20-month period (May 2022 to Dec 2023). I don’t know of anywhere I can get 5.0% annualized in a US government guaranteed investment for 20-months. For comparison, a 20-month treasury would only yield about 1/2 that.
JM says
Harry wrote in the article:
“We’re buying each other a gift this year to keep undelivered in the gift box in addition to our normal purchases. If the interest rate is still good next year, we’ll buy normally and keep the gift in the gift box. If the interest rate isn’t good anymore, we’ll skip the purchase, deliver the gift, and cash out immediately.”
Over on Bogleheads, someone suggested instead for the first case to deliver the gift and then purchase a new gift:
“Perhaps a better strategy is if rates are still high next year, then you make delivery of the iBonds in the gift box and then buy additional bonds as gifts.
The reason is this frees up liquidity.
The bonds you purchased in a prior year and just delivered will be redeemable immediately or in a few months.
However, if you leave those previously-gifted iBonds undelivered and go out and have the recipient purchase new bonds, the newly-purchased bonds will have a one-year lockout and the gift bonds you previously purchased will still be locked out.”
MikeG says
JM,
I agree with your thought process on how to look at what to do come 2023. It’s a better approach.
Marc says
Thanks for the gift tax clarification. I agree it makes sense not to go out too many years holding gift I Bonds for a spouse for the reason you stated. Thanks again for your article.
Dunmovin says
Thanks Marc, looking also at diversity of funds/assets issue too. Loosing 7% is a stand-alone issue from my perspective and gaining flexibility with knowing the short box time is a factor given ages, etc
Harry what do you think…I believe you alluded to having already gifted this year but a further reflection on October notion?
Thanks
Alan says
Marc and MikeG, thanks for the research and discussion. My wife and I are gifting each other 20k this year. We will deliver 10k each in 2023 and 2024, depending on what the rate is at that time. A great deal!
Donald says
Alan and Mike G. So, did T.D. in fact, allow your gift purchase to go through for more than $10K to the same person this year?
TD website says this about gifts, regardless of when they are ultimately delivered,
“… 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.”
I guess I could try it for a small amount and find out, but I’m reluctant since T.D. says they are keeping our previously disallowed purchase for 8 – 10 weeks before returning it. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#much
Dunmovin says
Can a trust buy for the gift box? Can a sole proprietorship (sp) buy for the gift box? Can the sp buy for a gift for that/the individual who “runs/owns” the sp? For the spouse of the owner? Any limit on either buyer? Thanks
Harry Sit says
Trust and business accounts can’t buy or receive gifts.
Matt says
Great article! Quick question – when you bought the I-Bond for your wife, did you name her as the sole owner? Or was she the primary and you the beneficiary? Does doing the latter have any tax implications?
Harry Sit says
She was the primary and I was the beneficiary. No tax implications. Who’s the beneficiary or not having a beneficiary only matters when the owner dies.
Lizzie says
Hey Harry. I’m trying to convince my partner to do this & was wondering if you could help. Can you point me to any literature that says the I-bonds in the gift box accrue interest from point of purchase (not delivery) and that the minimum one-year holding period starts from point of gift purchase (again, not from delivery)? She says she spoke to a friend at work that said otherwise and neither one of us could find anything on this online. Thanks a lot! Al
Harry Sit says
Other than whose name is on the bond, a gift bond isn’t any different than the bond you buy for yourself. When a bond starts to earn interest and when it can be redeemed are already defined for all bonds. They don’t have to say it separately for gift bonds when it isn’t any different. If her friend at work is making up special rules for gift bonds, have the friend show her those special rules. Or you can confirm with TreasuryDirect customer service. Click on Contact Us on the top right of the TreasuryDirect website to find the phone number and email address for customer service.
Dunmovin says
Martin…what happened you gifted/delivered $30 K to one person? All rejected, all delivered, or partial? See your post of January 25th
Martin Anderson says
Recipient opened a TD account, which didn’t pass their online ID verification, so the recipient had to send in manual verification. We’re still waiting TD to process that. As soon as the account is opened, we plan to move several years worth of accumulated gifts to the recipient account.
Dunmovin says
Thanks for update and look forward to next one.
Harry, I did a test/small gift purchase from me to spouse B, the TD video wasn’t the clearest but there were three boxes on registration page, owner, primary, and beneficiary. And there were two places for “names.” I checked primary and entered spouse B name, etc. and for other place/name entered mine. At the end of the day, registration was reflected in the Gift Box as spouse B with soc number, then next line POD and then next line with my name and soc number.
Harry, is that what one does to ensure a beneficiary for intended recipient of gift? Thanks!
Harry Sit says
You must have chosen the beneficiary option but yes, that’s the right way. If you choose the primary option, the second name can’t be yourself the gift giver. The gift recipient can change all this after you deliver the gift. Putting in a second name when you buy the gift makes sure the designated second person will get the gift in case the recipient dies before you deliver the gift.
Wil says
Martin, do you have an update on moving those several years gifts to the recipient account? Thanks.
Dunmovin says
Harry, let me fine tune my Q from above.
There are 3 options for gifting…Sole owner, primary owner, and beneficiary. My experience was I could only check one of the boxes. As I recall I checked primary owner and entered spouse B and I did not check beneficiary when i then entered my name as the bennie. Again, the TD registration later in the purchase day was reflected in the Gift Box as spouse B with soc number, then next line POD and then next line with my name and soc number.
The 3 box option was what was confusing to me…yet only one could be selected….perhaps b/c a name (not mine) in the second entry is listed it is deemed a bennie? thanks
Harry Sit says
POD means the person after that abbreviation is a beneficiary, and you get POD only if you choose the third option. It’s not possible to choose the second option and enter your own social. You get an error that way. It won’t let you buy the gift bond. You can try it and see it yourself. The second option works only when you designate a third person on the gift bond.
Dunmovin says
Correction…the second name is mine as a bennie
Dunmovin says
Update…when makes second gift to the same person (registrant) and same beneficiary, it is in the drop down “menu” for registrations and the 3 box options never comes up
Julia says
Harry, do you know how to cancel a gift purchase after it was entered? My mother entered a gift purchase for me and chose me as a sole owner and forgot to list her as a beneficiary, which she should have done just as a precaution. We are bot finding a way to cancel this purchase and re-do the registration with me as a sole owner and her as my beneficiary. Does the cancelation option exist? Or can the registration be changed after the purchase completes and sits in her gift box? Or is the only option now for her to deliver this gift to me after 5 days and me change the registration of this gift in my own account?
Harry Sit says
I don’t see any way to cancel unless she contacts customer service and asks them to cancel and refund. You can add a beneficiary after she delivers the gift to you.
HueyLD says
Has the purchase been completed? If the purchase is still pending because your mother scheduled the purchase for a future date, then it can be canceled via “Manage Direct” menu.
Nick says
Can you also gift $10k now to your children for a 2023 delivery? Just wanted to clarify based on your post. Thank you for all you do!
Harry Sit says
Yes, in the same way a grandparent buys a gift if you’d like to pre-purchase for 2023.
Matt says
I’ve already bought 10K in my daughter’s minor-linked account for her this year. So can I buy another $10K in her minor linked account now as a gift or do I now need to buy this in my account as a gift for her?
Harry Sit says
Nick in comment #30 was talking about pre-purchasing I Bonds as a gift for next year to take advantage of the current high rates. You pre-purchase in your own account as a gift for someone else and hold it undelivered until a future year. See the “Pre-Purchase/Frontload” section in this post.
Matt says
Thanks Harry
Harry Sit says
I read several reports of people intending to buy a gift but ending up buying bonds for themselves, which caused them to exceed the annual purchase limit. I added a new “Avoid Mistakes” section at the end.
HueyLD says
Great idea.
Even I got confused initially but TD gave me an error message which allowed me to pick the right ownership the second time around.
Donald Graves says
If you do make the mistake Harry cited, T.D. keeps your money for 8 – 10 weeks:
Email from T.D: “Your purchase exceeds the annual savings bond purchase limitation. Please be advised the limit is $10,000 per series and TIN per
calendar year. A refund of the excess purchase will be made to the bank
account where the purchase originated. You should receive your refund
approximately 8 to 10 weeks from the date of purchase. You will be notified
by email when the refund transaction is processed.”
sscrla says
” Please be advised the limit is $10,000 per series and TIN per calendar year,” except it isn’t, as we know that you and your living trust can use the same SSN. They really need to write new scripts, ones written by people who understand both English and the rules.
Matt says
Harry – My wife and I bought $10K of I Bonds for each other this year and then purchased another $20k for each other as gifts to be delivered in future years. We’re named as beneficiaries on one another’s gift bonds.
What happens if she dies in 2023 before I have had a chance to gift her the $20K I bought for her? I still have $20K of her gifts (with me as beneficiary) sitting in my gift box. Does all the $20k that I gifted her come back to me automatically because I am the beneficiary and would I be able to get all of it in 2023 or do I have to space it out over 2 years so that I don’t go over the annual $10K limit?
As always, thanks.
Harry Sit says
TreasuryDirect will move the bonds to your account when you send the death certificate. Inheriting bonds doesn’t count toward your annual purchase limit.
Lizzie says
Harry – My wife and I bought $10K of I Bonds for each other this year and then purchased another $20k for each other as gifts to be delivered in future years. We’re named as beneficiaries on one another’s gift bonds.
What happens if she dies in 2023 before I have had a chance to gift her the $20K I bought for her? I still have $20K of her gifts (with me as beneficiary) sitting in my gift box. Does all the $20k that I gifted her come back to me automatically because I am the beneficiary and would I be able to get all of it in 2023 or do I have to space it out over 2 years so that I don’t go over the annual $10K limit?
As always, thanks.
Matt says
Do you ever see the interest accrue in your TD account?
John Richter says
Yes, I’ve had I-bonds for several years. I can see the accrued interest when I open the “current holdings” tab.
Alan says
Harry, my wife and I have each purchased 10k this year and have gifted each other another 10k. We are considering gifting an additional 10k each before the end of the month so we would have 20k each in our gift boxes. We would then deliver 10k each in 2023 and 10k in 2024. If the rate declines significantly by January, 2024 we could deliver them and redeem them in January since the holding time starts once the bonds are in the gift box. Do you see any downside to doing this?
Thanks for the article!
Harry Sit says
No downside as long as you’re willing to wait until January 2024 and live with whatever the rates will be in 2023.
JM says
I think this is the great advantage of the frontloading technique, and I thank Harry for publishing this article!
Unless you truly feel that the fixed portion of the I Bonds rate is going to jump up significantly, then I see no downside to arranging your future years’ purchases now, provided you’ve got the funds and would otherwise plan to buy them later anyway…
By frontloading and buying more before the end of April, you start the clock with 7.12% in the first six months and then 9.62% for the six months after that, completely risk-free. Hard to lose with numbers like that!
David says
Great article – it’s probably the best overall one I’ve seen on gifting I Bonds. One comment/clarification though, re: the following:
“When Gifts Are Useful and When They Are Not
If you’re thinking of “borrowing” other people’s names and Social Security Numbers to buy more I Bonds as gifts but keep the bonds for yourself, it doesn’t work.”
I’m not married, but my best friend and I are being what I call “I Bond Buddies”. We’re simply doing the same thing that two spouses would do. Obviously, you have to have 100+% confidence in your buddy.
sscrla says
While Harry does a good job of quoting the Code of Federal Regulations, he leaves out one important fact. There is no purchase limit; instead, there is an acquisition limit. TreasuryDirect confuses people because it doesn’t use the correct terms.
§ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.
(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.
The TreasuryDirect website also gives incorrect tax information, stating that you can’t switch from annual to deferred reporting of interest.
“Once you start to report the interest every year (for example, for a child in the child’s Social Security Number), you must continue to do so every year after that. for all your savings bonds (or, for example, all the child’s bonds) and any you acquire (or, the child acquires) in the future”
From pub 550: “Change from method 2. To change from
method 2 to method 1, you must request permission from the IRS. Permission for the change is automatically granted if you send the
IRS a statement that meets all the following requirements.”
In short, don’t trust what you read at TreasuryDirect.
Dunmovin says
Ss…And your point is? Who do you trust if not the one with the keys to magic kingdom? Not invest in ibonds! Life is gray…get use to it !😀
HueyLD says
I think sscrla’s point is that TD is not a tax authority, but the IRS is. And his points are valid.
Harry's fan says
Harry, thank you so much for this article. Your knowledge on this topic is astounding.
I wonder how the delivery to minor’s account would work? Could the fact that minor’s account is on TD online account of his/her parent be an issue?
We already maxed our gifts to each other and since we plan to send our child to a private high school in a couple years, we think saving bonds could be a better way to pay for the tuition than 529 plan. Our state doesn’t allow to deduction of 529 contribution. I guess using redeeming saving bonds to pay for the tuition shouldn’t be a problem?
Harry Sit says
Gift delivery to a minor’s account works the same as delivery to an adult’s account. The minor linked account has its own TreasuryDirect account number. Redeeming a child’s I Bonds for their private school tuition is OK.
sscrla says
Is a “gift ” even necessary? When you open the minor linked account, you put money into it. This is a gift, and would be reported on a gift tax return if you gave the child more that the annual exemption that year (unless the money came from a UTMA where the gift had been made in a previous year). Can’t you just put more money into the child’s account as a regular purchase? Another gift tax return might be required, but I don’t see that this is a “gift” that gets delivered.
Harry's fan says
I thought it’s not possible to purchase more then 10k per year in minor linked account, so decided to “frontload” 20k more, same as for my spouse
sscrla says
“We already maxed our gifts to each other and since we plan to send our child to a private high school in a couple years, we think saving bonds could be a better way to pay for the tuition than 529 plan.”
You didn’t mention that you had already “maxed” your gifts to your minor child. Yes, if you want to give your child $30,000 at today’s rate, you will need to front load $20,000 as “gifts to be delivered in future years” assuming you have already given $10,000 to your child as a regular gift (I interpret “$20k more” as more than the $10K you already bought in the child’s account this year).
Tina says
Yikes-help! How/Can I fix this? My husband and I gifted each other $10k with the plan to deliver next year. My gift to my husband went correctly. My husband added me as a registrant but when he bought the bond he did not scroll down for my name, and instead has his as the recipient. Is there a way to unwind this mistake? And if not, what are the consequences?
Thanks.
Harry Sit says
He’ll receive an email from TreasuryDirect with the next steps.
Wil says
Harry,
If I want to gift my wife $20K for future year, do I have to buy this $20K in two separate transactions or can I buy it in one single transaction and deliver $10K to her in one year and the rest $10K to her in another year?
Thanks.
Harry Sit says
Two separate transactions because each buy order is limited to $10k.
Alan says
Harry, if I redeem an I Bond before 5 years is the 3 months of interest I forego the 3 months just prior to redeeming them or the first 3 months after purchase? Thanks
Harry Sit says
The last three months.
iBondNoob says
Hope Harry or someone can help. I bought $10K iBonds for 2022. I want to gift $10K to my wife ( Spouse B) for future years and for her to gift me $10K. I have never gifted before. I am having trouble executing on this buying action on the TD site.
When I login to my TD account and go to buying screen, in the drop down next to “Add New Registration”, I see 2 entries, 1) MY NAME 2)MY NAME WITH SPOUSE B.
Should I use MY NAME WITH SPOUSE B ? or Should I do “Add New Registration” and add SPOUSE B ? If I do a New Registration, Should I choose a) sole owner or b) Primary Owner or c) beneficiary ? Eventually, when the gift is “delivered”, I want both of us to have access ( i.e Spouse B WITH MY NAME or MY NAME WITH MY NAME) with transaction rights when transfer is complete. How do I go about doing this. Thanks for your help
p.s: Excellent article by Harry and awesome comments from knowledgeable readers!
MikeG says
OK I got you.
Click add a new registration. Then click on beneficiary. Add the primary owner at the top and the beneficiary under that.
Click the gift bond selection near the bottom and hit enter.
On the next scree, click on the drop down menu for registration and select the one that says “Spouse POD you”. Do not select the one that says WITH.
Enter the amount and go ahead and submit it.
I did this the other day so been down this road already.
MikeG says
Also, don’t think you can add view or transaction rights until the gift has been delivered. May not even be able to do it then as it belongs your spouse with you as POD and NOT the second owner. Those rights may only be assignable to second owners. Not 100% certain here, but I think this is correct.
iBondNoob says
Thanks MikeG for taking the time answer my question. Does this mean I can never change the Registration from “Spouse POD You” to “Spouse WITH You” even after delivery to her in the future? not sure if there is a lot of downside for being a POD beneficiary only, but my spouse has no interest in any of the money matters so If I cannot get transaction rights to her “deliverd” iBonds in the future, it could be a hassle in the future with redemptions etc.
Rebeccah says
View rights are assignable to secondary owners and to beneficiaries. Transaction rights are assignable to secondary owners, but not to beneficiaries.
Harry Sit says
The gift recipient can change the registration after receiving the delivery to elevate you from a beneficiary to a second owner and assign transaction rights. See How to Add a Joint Owner or Change Beneficiary on I Bonds.
MikeG says
I would THINK she can change the registration – remove beneficiary and insert a second owner (and then add view and transaction rights) once the bonds have been delivered to her and show up as her’s in her TD account.
FWIW, I originally bought my bonds as sole owner and a day later changed the registration to add my wife as the second owner. It was simple and no issues whatsoever.
iBondNoob says
Great. Thanks for helping me and making me feel comfortable with your responses.
iBondNoob says
I found this info from a SeekingAlpha article:
“You can designate a second owner or beneficiary for the I Bonds you buy as a gift, but you cannot designate yourself as a second owner. You can, however, designate yourself as a beneficiary.”
https://seekingalpha.com/article/4502473-i-bond-gift-option-suggested-in-comments-allows-you-to-double-down-on-current-8-53-percent-yield
Harry Sit says
The same info (and more) is in the “Unexpected Death” section of this post.
Roy says
Thank you so much for these write ups on I Bonds! I also read all these comments so I just want to be sure. I want to buy for my under 18 grandkids. My sons and daughters need to create an account for them first and then I can gift to their kids? I guess another way is to just give my kids the money and they can just buy the bonds in their kid’s name..
Regarding gifting to another adult, I would be the beneficiary, correct? I saw in one of the comments someone mentioned the gift giver cannot be the second owner?
Harry Sit says
Your sons and daughters first need to create an account for themselves. Then they create a minor linked account for their kids under the adult’s account. See Buy I Bonds in Your Kid’s Name. Now, either they give you the grandkids’ Social Security Numbers and account numbers and you buy and deliver gifts directly to the grandkids, or you give them money and they buy in your grandkids’ accounts.
You can name yourself as the beneficiary but not the second owner when you buy gifts for another adult. The gift recipient can remove or replace the beneficiary or add you (or someone else) as the second owner after they receive the gift.
ed says
I purchased 10K in i-bonds for my child via a child-linked account, and my wife did the same thing in April 2022. How does this work with the 10K limit rule for individuals purchasing/receiving given that they are gifts to the same child from each parent? Does each parent coordinate with one another on staggering the delivery?
JM says
You couldn’t both give your newly-purchased $10K gifts to the same child in the same year – that would violate Treasury’s rules. So, you’d have to coordinate.
And just a quick note about gifting to kids – keep in mind that if a child plans to go to college and apply for need-based financial aid, then assets in their own name will count at a much higher level towards expected family contribution (and against qualifying on need) than the same assets in their parents’ names.
sscrla says
You used the past tense, meaning your child has already acquired more than allowed in a single year. You may get away with it this year, but I suggest you follow the rules in the future. The CFR defines “you” as an account holder, and even if your child has two minor linked accounts, your child is still only one “you.”
HueyLD says
The Treasury can reverse the excess minor linked purchase ($10k) and return the money to one of the parents. The rule is very clear: “ You may purchase up to $10,000 of each savings bond type – EE or I bonds – per person each calendar year.”
https://www.treasurydirect.gov/indiv/help/tdhelp/help_ug_135-MinorAccountSum.htm
ed says
Thank you!!!
Roy says
Thanks, Harry! One final question, does a recipient need to have a TD account first? My adult aged kids don’t have one, so would they need an account for me to deliver the gift to them?
Harry Sit says
It’s covered in the “Gift Box and Delivery” section. The recipient will need to have a TreasuryDirect account eventually to receive the gift delivery but they don’t need an account when you buy the bonds. You can buy the bonds first, and then they will take their sweet time to create the account. You deliver the gift bonds afterward.
Shankar says
Excellent thread and discussions! Learned so much from this. Thank you everyone.
To clarify some points:
There are no tax reporting between the time the gift is purchased (this year) and the time the gift is given to the child when they turn 18, is that right?
We are not sure how to proceed – thinking of having the 529 plan as only stocks and having the money in this I-bond in the child’s name as only bonds.
Since only one of us have our TD accounts activated at this time and the time in April to purchase is around, we are thinking of purchasing $15,000 worth of IBonds on our child’s name and gifting it to them when they turn 18. would this need to be included during college application time for scholarship purposes?
also since my own account has not yet been approved, pending verification, we are also thinking of my wife gifting me $10,000 worth of Ibonds. In fact, as we are super risk averse and have been having all our money sit in our bank account so far, wondering whether to use the bulk of this money in our bank as a joint account for my wife to purchase as a Ibond gift in my name. or should the money only come from an account that is only in my wife’s name for it to be considered a gift?
if suppose my wife purchases $30,000 worth of Ibonds as gifts this week (to be given to me over the next 3 years), could we in the interim withdraw this money if there is a need for the money – or is the money locked until the time i am able to receive as a gift?
Thank you for all your help.
Harry Sit says
Undelivered gifts to a child are still the child’s assets. They should be reported on college financial aid applications.
Using a joint bank account is fine. Undelivered gifts are in limbo. No one can cash them out.
JM says
As noted above, about gifting to kids – keep in mind that if a child plans to go to college and apply for need-based financial aid, then assets in their own name will count at a much higher level towards expected family contribution (and against qualifying need) than the same assets in their parents’ names…
Parental assets are calculated at up to 5.64% on the FAFSA. Student-owned assets are counted at a rate of 20%.
Wil says
Hi Harry,
You mentioned there is $16,000 cap for gift to avoid filling the tax form. I am thinking to purchase $10,000 x2 ($20K in total) to deliver it to my spouse in the future, do I need to pay gift tax for 2022?
Thanks.
Marc says
I asked the same question because I also didn’t know the rule that unlimited gifts to a spouse are permitted under gift tax laws, so no gift tax form is required. The $10,000 per I Bond purchase or delivery limit still applies per year, though.
JM says
Harry wrote above:
“Gifts to the spouse aren’t limited by the $16,000 annual exemption amount. If you’re willing to hold the gifts for many years even when the interest rate on I Bonds isn’t competitive with other alternatives anymore, you can buy a lot more than $16,000.”
Someone on Bogleheads commented:
“What I wanted was an inflation-adjusted annuity as a Social Security bridge. Works well for that, at least up to what you can deliver out annually. My wife and I each have $90k sitting in the gift box at this point.”
Steve says
Harry,
Is the gift amount counted against the year the gift is purchased or the year the gift is delivered? If I purchased $20K i-bond as gift this year, and deliver $10K in 2023 and $10K in 2024, do I report the gift($20k) in 2022 or do I report $10K in 2023 return and $10K in 2024 return? If it is the latter, then nothing really needs to worry about as $10K is below the annual CAP. Thanks.
sscrla says
“Buying I Bonds as a gift counts toward your annual gift tax exclusion amount in the year of the purchase, which is 16,000 in 2022.” From Harry in the Gift Tax section.
However, this does not apply to a spouse, to whom you can make unlimited gifts.
Wil says
Harry and I-Bond guru,
I am still confused here. Since the i-bond gift will not be delivered until future years, this means the receiver really doesn’t receive the gift this year(2022). Is this counted toward this year’s tax-given limit for me?
Martin Anderson says
For financial aid purposes, most people who are under 24 are considered to be dependent upon their parents. When that’s the case, their assets and income are deemed to include their parents’ assets and your income. Financial aid won’t care whether you’ve given them a I-Bond worth $10k, or you have your own I-bond worth $10k. Either way, financial aid will assume that there is $10k available to pay for college.
There are a few exceptions, and so it may matter if your adult child is planning to marry young, have children young, or join the military.
See this link for more details:
https://finaid.org/about/contact/fafsa-independent-student
Matt says
Harry & I-Bond team – When gifting to spouse, why would you add yourself as the beneficiary instead of just co/ joint-owner? I know there’s the difference in viewing vs. transaction rights, but other than that, are there other reasons for going down the beneficiary vs. co/ joint owner route? Is there any probate involved for a beneficiary? Any other pros & cons? Thanks.
Harry Sit says
Because adding yourself as the second owner of a gift purchase isn’t an option. You get an error message when you try. The recipient can make you a second owner after you deliver the gift.
HueyLD says
I tried to make myself the secondary owner of my spouse’s gift bond but the system rejected my attempt. It does make sense that I cannot buy gift bond for myself.
And assigning myself as the beneficiary, aka POD, provides probate protection.
Martin Anderson says
A word about gift taxes…..
I’ve seen a lot of discussion about gift taxes in the comments. Many of the individual statements are correct, but there’s a lot of moving parts when it comes to taxes and so I encourage anyone who is thinking about making a gift to someone that exceeds the annual gift tax exclusion limit to research carefully.
I’ll provide a summary as I understand it, but bear in mind that I could be wrong. You should ask an accountant or do further research to determine for yourself what I’ve gotten right and what I’ve gotten wrong.
First, it is important to understand that gifts are taxed to the person making the gift, and not the recipient. The person who receives a gift has not received income and won’t have to pay any taxes under federal law. However, the gift must really be a gift. If you are giving someone a “gift” in exchange for them mowing your lawn, the IRS will probably treat that as earned income and tax the recipient (and not the giver). Similarly, if you give someone a “gift” in exchange for their car, you have bought their car, and neither gift tax nor income tax rules will apply. The gift/car transaction will likely be subject to state and local sales taxes.
Second, as Harry correctly noted, there is an unlimited annual exclusion for gifts to your spouse, which means you don’t pay any gift taxes on gifts to a spouse. You can give your spouse $100 million in a single year, or at your death, and no taxes are owed.
For gifts to anyone else, there is a $15,000 annual gift tax exclusion. That means that, every year, you can make a gift to any other individual for as much as $15,000 without owing a gift tax. This limit is a per giver and per recipient limit, so you can make as many $15,000 gifts in one year as you want. Your spouse can do the same. As a result, you can give an infinite amount of money to as long you split up the recipients so that no person receives more than $15,000 in a single year. In addition, your spouse can do the same, and so effectively, you and your spouse can give $30,000 to a single person every year with no gift taxes.
Third, even if you make a gift that exceeds the $15,000 annual per giver per person limit, that doesn’t mean you’ll have to pay gift taxes. You will need to file a gift tax return so that the IRS can apply the amount of the gift that exceeds the $15,000 annual limit to your lifetime gift tax exclusion limit, which is currently $11.7 million. The impact of using some of that limit during your lifetime is that you won’t get it again when you die.
So, if you make a $16,000 gift this year to your child, you’ll be using $1,000 of your $11.7 million lifetime credit. When you die, only $11.699 million of your estate will be exempt from the gift tax. If you’re not likely to have $11.699 million in your estate when you die, the only consequence of the gift will be that you’ll need to include a gift tax return with your 1040 filing next year.
Note that the $11.7M annual exemption could change. By the time you die, it could be $20M, or it could be $1M. If your estate at death is $2M, and the lifetime exclusion goes down, then that $1,000 gift this year could make a difference in how much tax you pay at death (and thus how much your heirs receive). But, as long as your estate at death is under the lifetime limit (minus any gifts in excess of the annual limit you made during life), then it won’t matter that you exceeded the lifetime limit.
For most of us, the total value of our estate at death will be well under the limit, and so it won’t really matter if you give away more than $15,000, except that you’ll have to file an additional document (a gift tax return) at the time you file your income tax return.
My discussion relates to federal gift tax. It is possible that your State may tax gifts as well, so you shouldn’t ignore that possibility without investigating it.
When it comes to Treasury Direct, if you create POD registration, that person is not receiving a gift until your death. That won’t raise any issues with the annual gift tax exclusion, but it will be applied against your lifetime limit when you die. If you create a joint registration, that will count as a gift on the date you create it, though if that person is your spouse, it won’t matter (see above).
However, if you create a gift box gift, I suspect that will count as a gift in the year you create it, regardless of when you deliver it. Federal tax law on when a gift is completed is very complicated, but generally speaking, if you can’t undo it, the gift is completed. I’ll leave it to Harry to answer the question of whether you can undo an undelivered gift box transaction, but if you can’t, then I think it is likely treated as a gift on the day you bought it.
Steve says
Thanks a lot for the summary. One question, if I gift my spouse $16K+ in I-Bond this year(2022) though the fund will be delivered in future years, do I need to file gift-tax return in my 2022 tax return even there can be unlimited annual exclusion between spouses?
Harry Sit says
No, you don’t need to file a gift tax return for gifts to your spouse.
Martin Anderson says
I believe that specific questions like that should be directed to your accountant.
Harry Sit says
A gift box gift can’t be undone. Even if you die before you deliver the gift, the gift still belongs to the designated recipient. Even if you don’t deliver the gift in 30 years and the bonds matured, the resulting cash still belongs to the previously designated recipient.
Anon says
Sooooo, part of the US Treasury, TD says how to structure a so-called gift for its site, yet doesn’t disclose it’s also a future gift for tax purposes requiring filing of a gift tax return in EVERY situation! That’s a good gotcha! I submit TD is NOT advising the other part of Treasury, ie, IRS, “go after this person” and if not it is aiding and abetting all “gifters!” Really…I don’t buy it!
Marc says
No one says you have to buy it, but you can indeed gift up to the $16,000 annual limit to anyone without filing a gift tax return, and can gift an unlimited amount to a spouse without filing a gift tax return. In terms of I Bonds, you can do the same thing, but you have a $10,000 “deliver from the gift box” limit per person per year unless that person has also purchased $10,000 of I Bonds for him or herself, in which case you have to wait until a subsequent year.
Marc says
Thank you for this post. I just want to point out that the annual gift exclusion for 2022 is $16,000, not $15,000. Other references to the amount should be adjusted accordingly.
Martin Anderson says
I think that you’re right. Also, it appears that the lifetime exclusion was raised to $12,060,000 as well.
Anon says
Marc…if one follows Martin’s logic ibond “gifts” are not a present interest/gift and therefore a gift tax return is required. The annual exclusion only applies to present gifts…there is a difference. I concur in that logic. But where we differ…My scenario is the term for gifts are not the same
sscrla says
“Note that the $11.7M annual exemption could change. ” I believe you meant lifetime, not annual.
Technically, there is no lifetime exclusion, rather there is a lifetime tax credit, which is often converted to the amount of gift that would be paid for by that credit. Looking at the 2021 instructions for form 709, you see “The basic credit amount for 2021 is $4,625,800. ”
https://www.irs.gov/pub/irs-pdf/i709.pdf
I really suggest people read the instructions, even if you aren’t filling out the form. (You should also check where you live). If you live in a community property state and make a gift of community property, it is treated one way; if you make a gift of separate property, it is treated another.
Martin Anderson says
And if you really want to go down a rabbit whole on the gift tax thing…
The annual gift tax exclusion (which is now $16k and not $15k as my post earlier stated) only applies to gifts of a present interest. That generally means that the recipient can enjoy the gift now. If the gift is a completed gift of a benefit that they can only enjoy in the future (a “future interest”), then it subject to immediate gift tax at its net present value and there is NO ANNUAL EXCLUSION.
So, for example, if I create an irrevocable trust and I put $16,000 in it for my adult child, and the terms of the trust are that my child can receive the funds in two years, then the $15,000 gift is NOT exempt under the $16,000 annual limit. The present value of receiving $16,000 in two years (which is somewhat less than $16,000) is immediately taxable. Attorneys have created a work-around for this, which is entitled a “Crummy Power,” (Google it) to allow the gift to be treated as the gift of a present interest. Basically, you give the recipient, my child in this case, the power to accept the money now, but if he doesn’t, then it stays in the trust for two years. The lapse of the power, however, can also be treated as a gift if there are other beneficiaries, and so it can get quite complicated.
My reason for bringing all of this up is that if the recipient of the gift box gift cannot access the funds until you deliver them, then the gift might be treated as a gift of a future interest, and then it would not be eligible for the $16,000 annual gift tax exclusion and could instead be immediately taxable at the 40% gift tax rate.
Again, I’ll defer to Harry on whether a gift box recipient could force a transfer before you decide to deliver it.
Anonymous says
Annual Exclusion does not apply in this scenario. And the amount is subject to Gift Tax. However, if one has not used up her/his unified lifetime gift/estate tax credit (“UGETC”), no tax will be payable — currently that equates to over $11MM of gifts until 20025 (or until Congress lower it sooner).
Anon says
I think too many are confusing a gift of Ibonds under TD regs with the notion of gifts under taxation code. There is no gift under the latter until/unless “delivered” by TD
sscrla says
Then again, your $10k gift might result in a tax of zero (before application of the credit). The gift tax is a graduated tax, and the 40% rate doesn’t apply until you have given over $1 million in taxable gifts. At the bottom end, only if your taxable gifts are over $10k does the 18% tax on the excess apply. See Table for Computing Gift Tax in the 2021 instructions.
sscrla says
“we are thinking of purchasing $15,000 worth of IBonds on our child’s name and gifting it to them when they turn 18”
You should read again about the annual limit on acquisitions (which TD refers to as a purchase by your child).
See the section on Purchase limit.
“The limit is on how much you can deliver to the same recipient in the same calendar year.”
P.S. the gift is made when you purchase the bonds in April 2022, so there is no “gifting it to them when they turn 18.”
Matt says
How does the redemption penalty in the first five years work? Say that I cash out on May 10th after holding the I-Bonds for a year. Would I still get interest for the first 10 days of May or for the full month of May? Would I lose the interest from Feb, Mar & April or would I lose the interest from Feb 10 – May 9th
Harry Sit says
You don’t earn any interest in May. You lose interest from February, March, and April.
Frank says
I thought I brought $10,000 as gift to my son. But somehow it did not show up in the Gift Box. I got an email from Treasury that it would return my money since I maxed out. I am wondering if there is a way to convert an iBond to a gift online. Thanks.
sscrla says
§ 363.95 How may I give, and who can receive, a book-entry savings bond as a gift?
You may give a book-entry savings bond as a gift in two ways:
(a) An individual may purchase a book-entry savings bond online as a gift and give it to an individual; or
(b) A person who owns a bond may transfer that bond to another person as a gift with immediate delivery.
(a) doesn’t apply to your purchase as you didn’t buy it as a gift. (b) doesn’t apply since they won’t let you buy this additional bond for yourself.
What you can do is buy a new bond as a gift with the either another $10k or the $10k that will be returned to you. Of course, you won’t get an April date on it, but it will earn the May rate if you get it done this month.
Dunmovin says
Q Harry, my spouse and I have TD accounts linked to our checking account which has our adult daughter (same last name) on the checking account too. Can I buy as a gift to daughter $10K of Ibonds (my spouse as beneficiary), have daughter set up a TD account, deliver those Ibonds to her and at 12+ months from purchase she redeems with the funds going to common checking account? Subsequently, she gifts those redeemed funds to me (I write a check and withdraw and I make a gift to her to cover her income tax on interest…with an effective interest rate being, of course, greater than that at a financial institution.)? What do you think? Do it similarly with spouse gifting and using the “Martin concept above,” have a total of $20K delivered to daughter in same year.? PS We trust our daughter!
MikeG says
If you make a gift to your daughter you can’t have a side agreement for her to give the money back to you simply because you want to buy more than $10,000 in i bonds.
You can do the front loading / pre-purchasing of the 2023 and 2024 (or more years) as gifts between your wife and you. That is within the rules.
Would have been a lot better to do this in April though.
Harry Sit says
If you want to give your daughter I Bonds, buy them as a gift for her. It’ll give her a boost. She’ll appreciate it. Asking her to give the money back feels fishy and icky. I would be upset if my parents proposed it to me. Responsible parents don’t drag their children into questionable schemes.
sscrla says
The limit on acquisitions in a single year of $10k applies to your daughter. Delivery of two $10k gifts in a single year would be an acquisition of $20k and is not allowed.
Dunmovin says
Legal question? Not here.
But a partnership or a gift and then a change in mind due to… and reread the Martin “success” story on delivery of more than $10K in one year to same person
Harry, what do you think?
Lizzie says
If my partner accidentally a gift for our minor child instead of buying in our child’s minor account, can we just open a minor account for him under one of our accounts and transfer the gift into his minor account?
Also, can my partner list himself as the POD on a gift bond to our child? Can he also do that on a bond that we buy in the minor account?
Harry Sit says
The child needs to have a minor-linked account regardless. You can open one for the child under your account and then your partner can deliver the gift to that account. The POD on a gift bond can’t be modified until it’s delivered. The purchaser can name any POD at the time of purchase whether it’s a gift or not.
Lizzie says
Hi again – when does the interest from April get posted in May? Sorry for all the questions – we’re relatively new to the Bond world. Thanks,
Harry Sit says
It doesn’t matter. You can’t cash out in the first year anyway. Whatever number you see is just a number you can’t do anything with. Just put the money in and check back after a year.
Mike says
Harry wrote in this article (EMPHASIS MINE): “You can buy a maximum of $10,000 for any recipient in one purchase BUT THERE’S NO LIMIT ON how many recipients you buy for or HOW MANY TIMES YOU CAN BUY FOR THE SAME RECIPIENT IN ANY CALENDER YEAR. If you’d like, you can buy $10,000 worth of I Bonds for each of your 20 family members or YOU CAN MAKE FIVE SEPARATE PURCHAES OF $10,000 EACH FOR THE SAME FAMILY MEMBER, ALL IN THE SAME CALENDER YEAR”
Does this mean that if I had $50,000, I can buy and gift $50,000 in I-Bonds to my mother in the same calender year, such as 2022, if I just make 5 seperate purchases of $10,000 I-Bonds? In other words, I can buy and gift $10,000 worth of I-Bonds once a day for the next 5 days this week and gift them all to my mother for a total of $50,000 in I-Bonds to her this week?
Thanks for your feedback Harry (and other readers).
Harry Sit says
The emphasis is on “buy” not “buy and deliver.” If you only buy and don’t deliver, absolutely. See the “pre-purchase” section.
Alexi Assmus says
What are the differences between being secondary owner and beneficiary?
Harry Sit says
The optional transact rights during the owner’s lifetime. See I Bonds Beneficiary vs Second Owner in TreasuryDirect.
Don S says
Mr. Sit, I own 2 – $10,000 I bonds (1 purchased in 2021, 1 in 2022). After I purchased them I was able to go into Manage Direct, Edit a Registration and select the I bond I wanted to add my spouse as a POD Beneficiary and did so. I bought a $10,000 I bond in 4/2022 as a gift for her but won’t deliver it until after 12/31/2022. I would like to add myself as a POD but am unable to pull it up under “Manage Direct, Edit a Registration”. How do I add myself as a POD to this I bond prior to Delivery? I couldn’t see any way to add the POD to the Registration prior to purchasing the I Bond.
Harry Sit says
You can’t add a POD to gift bonds you already purchased but you could’ve done it at the time of purchase. See the “avoid mistakes” section at the end of this post.
Now you have to wait until you deliver the gift and the gift recipient can add you if they so choose.
David Dunn says
If my father buys a Series I Savings Bond as a gift for me, he gives my name and SSN during the purchase. Will a “resource check” done by a government agency for purposes of calculating government benefits (like Medicaid, Medicare Savings Program, food stamps, etc.) show that I own $10,000 in these bonds? Let’s say that my father never tells me about the purchase and does not deliver the bond to me, instead holding it his gift box. Will that $10,000 in my name and SSN but NOT delivered to me still count as a resource of mine? Also, regardless of whether it counts against me or not, would I get away with not disclosing it on my renewal applications for government aid? I can always claim that I had no idea of my father’s gift to me since it had never been delivered?
Affinity4Investing says
David Dunn,
What a disgusting affront to the purpose of this educational and wonderfully helpful website. Interesting how $10K can be in one hand to buy an i-Bond and “government aid” checks be in the other as you query how to milk the system for all you can get out of it. Seriously guy, give us a break.
Harry Sit says
Whether it’s delivered, the bond has your SSN on it. It’s your resource. It’s the easiest to see because it’s literally in the government’s system. You can’t get away with not disclosing it.
Old mariner says
I thought David asked an interesting question. However, if I were David, I’d get an answer to my question directly from the government aid people. The specific rules and definitions of that aid agency are what determine if he needs to declare it or not.
If I person is eligible for certain programs (whether low income, high income, job related, education related, etc.), they have every right to avail themselves of those programs in accordance with the specific rules of each program.
David Dunn says
I’m simply interested in how the regulations for these savings bonds apply to my situation–the same as everybody else posting here.
Dunmovin says
You all should give David a break. If in fact one does not know about a purported undelivered gift with no TD accounts, they can’t disclose it. But if asked later, they’ll have to explain… everything including this Q&A!
Boba T. says
Wow. Think of the possibilities with undelivered i Bonds.
1). If the account holder dies before delivery of the gift, the gift i Bonds still belong to the recipient.
2). § 363.52 Bonds received due to the death of the registered owner are not included in the computation for the recipient.
Arthur says
This seems like a loophole in the $10K limit. Suppose your spouse has a terminal diagnosis. You then gift them a boatload of i-bonds, with yourself as the beneficiary. When they die, you get all the bonds, and are not subject to the $10K limit. Is that right?
Or you could find a bunch of people with terminal diagnoses (or just very elderly and frail), and gift them each $16K in i-bonds, with yourself as the beneficiary. Upon each death, you now have $16K more i-bonds. Since you never delivered the gifts, the only risk is if you die before they do. That would be weird.
Frank says
Can you please elaborate why buying I Bonds as a gift counts toward your annual gift tax exclusion amount in the year of the purchase and not the year of delivery?
sscrla says
My thought: because as Boba T. points out above, a gift given is a gift given, i.e., it no longer belongs to you. Whether the annual exclusion applies (is it a gift of a present interest?) is another question
Harry Sit says
Because the gift bond is permanently titled to the recipient as soon as you buy it. All economic benefits from that point forward accrue to the recipient. Delivering the bond doesn’t transfer ownership. It only gives them something that’s already theirs.
anonymous says
Harry,
The bond is not permanently titled to the recipient . . . in some cases.
For example, if there is a POD, and the recipient dies before delivery, the bond then becomes titled in the name of the POD recipient.
If the POD recipient is the purchaser, that means a “gift” was never given by the purchaser, because you can’t give a gift to yourself.
Which brings up the question . . . how can the purchaser be levied Gift Tax at the time of purchase if there is the possibility that the gift will NEVER be delivered to the recipient?
In the above example, there is no “future interest”. Only when a bond is delivered has a gift been actually given, and at that time it is a gift of “present interest”.
Even though Treasury may “title” someone as the “owner” of a bond, this designation is not in line with the customary definition of ownership and therefore invalid. You don’t “own” something if under some circumstances you can never take possession of it, or use it, or sell it, or give it to your heirs. With the Gift Box, the Treasury has created a limbo situation in which there is no certain “owner” of the bond until the bond is delivered.
Dunmovin says
Anon…I doubt if anyone will have a gift tax payment issue involving ibonds ($10k
purchases) but that is not the triggering event…was there a gift for gift tax purposes? Yes. The rights/title has passed (clearly beyond the control of giftor) but final delivery is conditional….not unlike other conditional gifts in estate planning, etc. That is not a present interest (where a annual gift tax exclusion may be applicable) If to a non spouse the open Q is…is a gift tax return required to be filed? Obviously no tax will be due given lifetime $ amount exemption. Now if someone has some regs/cases on the point…please share. We can all surmise whether or not this has hit the IRS radar…keeping in mind the $ amount AND TD as part of Treasury while the IRS shouldn’t be setting up gotchas for technical issues when Treasury could notify the public, and hasn’t!
This is the analysis that works for me!
cl Wu says
Help! I should have held the gift in the gift box since my husband already bought 10000 this year for himself but I hit the “deliver” button and he now has 20,000 on his account. What happens next?
Harry Sit says
Just wait. Maybe nothing. TreasuryDirect will contact your husband if they will take any action.
Pete says
Do as Harry says, just wait. I’m curious as to what will happen. After reading everything here, my wife and I each bought 10k of I Bonds this year and plan to buy another 2x10K as gifts this year for each other. But I got thinking. Since we both bought our 10K limit, why can’t we gift the 2x10K each this year as well instead of waiting and delivery later next year or so. I mean, lets say myself & wife and our 15 brothers all decided to buy I Bonds as gifts to our one niece. So 17 10K I bonds all delivered this year to our niece. So, yes, she can’t buy any herself, but she gets 17 10K I bonds. I believe Harry also gave an example above.
Leighton says
Pete: Under the heading “Purchase Limit” above, Harry says, “The principal amount of delivered gifts counts toward the $10,000 annual purchase limit of the recipient in the year of delivery.”
Crash says
Hi, I know individuals can buy / recieve gift bonds but can the other entities Ibonds (LLC, Scorp, trusts etc) also buy and / or receive gift bonds?
Harry Sit says
Entities can buy I Bonds but they can’t give or receive gifts. See Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp and Buy More I Bonds in a Revocable Living Trust.
HueyLD says
What Harry said is correct for GIFTING. There is a major difference between a gift and a transfer for TD savings bonds.
When one purchases a gift for another person, the purchase is irrevocably owned by the recipient upon purchase and the gifter does not own it, nor is the gifter liable for income taxes on accrued interest upon delivery to the recipient.
For a transfer, the transferor is liable for income taxes on accrued interest up to the date of transfer unless one of the three criteria is met as stated on the transfer form.
For readers of Harry’s excellent blogs, please keep in mind of the language and facts.
Martin Anderson says
Harry’s answer is not quite right. While it is true that entities cannot buy or receive I-bonds using the “gift box” feature, entity accounts can buy I-bonds and then give them has gifts (or receive gifts from others).
In order to do that, the entity would buy the I-bond for itself, subject to all the rules about purchase limits. Once the purchase was complete, the entity could then transfer the bond to another person using FS Form 5511. The transfer would count as a gift unless it was given for consideration. Unlike with a gift box, the bond wouldn’t belong to the recipient until the FS Form 5511 is signed.
Dunmovin says
Martin…exactly my point…merely b/c TD says a transaction may constitute a gift (for TD purposes) does not necessarily mean it constitutes a gift for other purposes, eg for gift taxes
Matt says
I set up a new treasury direct account but made an air in my bank account number. So before I corrected the problem my wife gifted a $10,000 Eivind to me. Subsequently my account got corrected and I purchased $10,000 I bond. And then my wife delivered the 10,000 gift band that she purchased for me and it shows up in my account as I have $20,000 in Ivonne securities. Doesn’t that put me over the limit? And what happens now? Can I return it to her gift box or will treasury eventually do that?
sscrla says
Is your wife cl Wu? She wrote ” I should have held the gift in the gift box since my husband already bought 10000 this year for himself but I hit the “deliver” button and he now has 20,000 on his account. What happens next?”
I agree with Harry’s answer: “Just wait. Maybe nothing. TreasuryDirect will contact your husband if they will take any action.”
From other websites I have seen responses where TD left the money in the account and said “never do that again.” I have also seen responses that included returning the money to your linked bank account. These were for a person buying $20k for themselves.
Sam says
Hi Harry, This is a great information. My Question is this…for someone having emergency cash of around 100K with very bad options in the index bond funds, is multiple purchases to the gift box an option. Can one ladder up on Ibonds between husband and wife with this multiple 10k gift option, wait out the CD low rates and bond index bloodbath that is happening out there? Curious on your thoughts on this approach.
MikeG says
You could but you’d have money locked up here for many years – perhaps several years after better opportunities surface in other fixed income options.
My wife and I invested $60K back in April. $10K for each of us for 2022 and then gift purchases for one another for 2023 and 2024. Did not really want to lock up money till 2025 and beyond not knowing that is going to happen with I Bond and other market rates between now and then.
Dunmovin says
Mike, try delivering the gift to one spouse now and see if it “goes through”…if it does, you can purchase more next year. Let us know what happens.
Boba T. says
If a substantial number of gift i Bonds remain in the gift box, undelivered, when the DONOR passes away, does the $10K per year per recipient limit still apply? Or the named recipient gets all that delivered in one fell swoop? Makes for interesting estate planning possibilities for older donors (since there is no limit on purchase of gift i Bonds). Does anyone know the answer? Thanks.
HueyLD says
My educated guess is that the legal owner of undelivered gift bonds, i.e. the named recipient, can call or email TD and have “all” undelivered gift bonds delivered at once.
I think it can only be settled by calling or emailing TD.
Dunmovin says
It’s still not clear to me and possibly others…
1. If ibonds are purchased as a gift to a non spouse, is a gift tax return required or is this considered a present interest transfer and subject to normal annual exemption amount?
2. And if multiple gift ibonds are again made in the same year to same nonspouse…what is the gift tax ramifications?
3. Delivery would be through various years in the future given the TD $10k per delivery year rule
Thanks
MS says
Thanks to everybody for all these great posts, I wanted to tag to the last questions:
I already purchased 10k I-bond for my daughter and want to purchase another 10k as gift to be delivered next year. Would this require gift tax filing? In other words is the first 10k considered as gift?
Marc says
Assuming the first $10K I Bond was a gift from you to your daughter in 2022, the second $6K in 2022 would incur no gift tax since the annual gift exclusion to anyone other than a spouse is $16K. Therefore it seems to me that the additional $4K overage would require a gift tax filing.
Martin Anderson says
If you are married, then have your wife give the second I-bond to your daughter. Your wife has a $16k annual exclusion just like you do.
Dunmovin says
Q for all…assume non spouse is recipient….why is a gift box purchase a present/current purchase and subject to annual exemption amount….there is a difference in the process for a gift purchase that vests/delivered immediately this year as compared to the gift box purchase for delivery in subsequent year(s). TD rules on $10k delivery limit per year person is a separate matter. Any authority for gift box being a present gift? Harry what do u think? Thanks
Dunmovin says
As a PS to the post above:
“Looking at other sites…I see that the Q being asked was also posed before (see below)…I haven’t seen any definitive answer BUT i did find another robust thread on this narrow topic (over 200 posts!) on/at
https://www.bogleheads.org/forum/viewtopic.php?t=306297&start=150
“Any idea what’s the gift tax treatment? Does the bond count against the gift tax exclusion in the year when the savings bond are purchased and put in the gift box (because “the registration is irrevocable”), or in the year when the bond is transferred to the recipient’s account (because until then the purchaser still has some control over it)?
Anyone see “the” answer???
Harry, what’s the verdict on tax treatment for gift box purchases? Thanks
Harry Sit says
It’s already covered in the section “Gift Tax Form 709.”
MS says
Thanks Marc! That’s a good point but my wife gifted our other daughter, so she will be limited to 6k as well. Actually that brings my next question, can I gift my other daughter $16k without reporting gift tax? If the answer is yes my wife would be able to do the same so we can buy $32k and gift them to our daughters in 2023, does that sound correct?
Marc says
I would say each individual parent can gift up to $16K per year to each individual child, regardless of the financial instrument (cash, bonds, stocks, etc.).
With I Bonds, you and your spouse can each buy $10K for each daughter now and deliver $20K to each daughter now ($40K in all).
In addition, you can each buy an additional $6K for each daughter now, but hold in the Gift Box for the remainder of 2023 and deliver $12K to each daughter any time after January 1, 2023 ($24K in all).
The total purchase comes to $64K between you and your spouse.
Of course you can add more I Bonds now by buying for yourselves and gifting to each other as well.
MS says
That’s right, although can we deliver $20k for each daughter right now? I thought the limit per person per year is $10k for I bonds
Marc says
Oops, you’re right. You can only deliver $10K to each daughter now but you can buy $32K between the two of you for each daughter now totaling $64K. You just have to stagger the delivery $10K per year per daughter. Sorry for the confusion on that point.
Dunmovin says
Harry, sorry I didn’t see anything in your discussion on form 709 dealing with gift box purchases, i.e front lot loading the gift box, on taxes…what did I miss? Should your readers know the tax consequences of gift box purchases? Thanks!
Harry Sit says
It’s the same whether you front load or not. Buying I Bonds as a gift counts toward your annual gift tax exclusion amount in the year of the purchase (not the year of delivery).
HueyLD says
To add to Harry’s comments, those who are inclined to read should carefully study the following federal laws/regulations on the definition of completed gift and irrevocability of a gift savings bond upon purchase.
31 CFR § 363.96(b) and
26 CFR § 25.2511-2(b)
Quotes:
“ The gift bond will be registered in the name of the recipient(s). The registration is irrevocable with regard to the owner named on the gift bond.”
“ As to any property, or part thereof or interest therein, of which the donor has so parted with dominion and control as to leave in him no power to change its disposition, whether for his own benefit or for the benefit of another, the gift is complete. ”
anonymous says
HueyLD
The gift of an I-Bond held in the Gift Box is NOT complete until delivery, thus not subject to Gift Tax, even though the Treasury says the recipient is the “owner”.
Here’s why:
26 CFR § 25.2511-2(b) says:
“ As to any property, or part thereof or interest therein, of which the donor has so parted with dominion and control as to leave in him no power to change its disposition, whether for his own benefit or for the benefit of another, the gift is complete. ”
That means that if the Donar still retains “dominion and control” to be able to “change its disposition”, the gift is NOT complete.
31 CFR § 363.96(b) says:
“you (the Donar) may hold the bond in your TreasuryDirect ® account until you are ready to deliver the bond to the owner named on the gift bond. ”
Thus, the Donar has “the power” to decide when, or if, the bond is delivered (“disposed”), at his sole discretion. Not the Treasury, nor the recipient. In fact, the Donar can choose to never deliver the bond at all. Or, if the bond is POD in favor of the Donar, he/she can hold up delivery hoping the recipient will die first, and then ownership of the bond will revert to the Donar.
(Example: A marriage goes sour and is heading for divorce. The Donar now wants the spouse to never receive the bond in the Gift Box. The recipient wants the bond and asks the judge for it. But according the Treasury, she already owns the bond — it is not her husbands property so cannot be obtained through division of assets. The husband could be seen as the custodian of the bond until delivery, but as such he has the statutory right to deliver the bond “when he is ready”. 31 CFR § 363.96(b).
According to 26 CFR § 25.2511-2(b), the gift is “NOT complete”. Only when the bond leaves the Gift Box and is delivered to the recipient is the gift complete. How then can the IRS justify a gift tax on something that has not yet become a gift.
Dunmovin says
Then if one gift boxes $20k to the same person for delivery in outyears, a gift tax return is required the year of purchase but no tax is due…is that what I’m reading?
sscrla says
It depends on what you mean by due. There is a tax due, and you pay it with your lifetime credit. That nothing comes out of your pocket doesn’t mean there wasn’t a tax and you didn’t pay it. Income tax works the same way. You have tax due, but you have credits you apply against that tax. That doesn’t mean you didn’t get taxed.
Marc says
Not if the person is your spouse.
Dunmovin says
The lifetime multi dollar gift/estate exemption provides no tax is due in this scenario but a return is required since the annual exemption only applies for gifts to same person is <$16k. Income tax is irrelevant. Again, a gift tax return is required…right Harry?
Dunmovin says
Harry…see your other posts on your ibond thread…let me clarify earlier posts…what do you think…does one need to file a gift tax return when greater than $16k is gift boxed to one person, a non-spouse, in one year? Is this something that may be of interest to all? Thanks
Harry Sit says
Buying I Bonds as a gift counts toward your annual gift tax exclusion amount in the year of the purchase (not the year of delivery). The gift tax annual exclusion amount is $16,000 in 2022 from any one person to each non-spouse recipient and unlimited to a spouse. If the I Bonds you buy for someone plus any other gifts you give to the same recipient in the same calendar year exceed the annual gift tax exclusion amount, you’re required to file a gift tax return on Form 709.
The gift tax return is separate from the income tax return. It goes to a special address. When you apply part of your lifetime exemption amount, you don’t pay anything out of pocket but you’ll have to keep track of how much of your lifetime exemption amount you have used up and how much you still have left. See IRS Instructions for Form 709.
sscrla says
“Not all gifts qualify for the annual exclusion. A gift must be of a “present interest in property” to qualify for this exclusion from the gift tax.” https://www.pnc.com/insights/wealth-management/transferring-family-wealth/annual-exclusion-gifting-explained.html
The law:
(b) Exclusions from gifts
(1) In general
In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, …
https://www.law.cornell.edu/uscode/text/26/2503
I don’t see how a bond given as a gift but not delivered for four or five years is a gift of present interest. It would seem that while the gift is completed, it is a gift of future interest and thus not eligible for the annual exclusion.
Harry Sit says
To avoid the tricky determination in whether it’s present interest or future interest, only gift to the spouse or deliver gifts to non-spouse within the same calendar year. There’s no ambiguity in either scenario.
Harry Sit says
sscrla – I edited the “Gift Tax Form 709” section to make the distinction between present interest gifts and future interest gifts. Gifts to non-citizens have additional nuance in the IRS instructions.
Rebeccah says
Harry, what if the spouse is a noncitizen (a permanent resident)?
Harry Sit says
Sorry, it’s not my expertise. Please search for the word “citizen” in IRS Instructions for Form 709.
Dunmovin says
To nonspouse…as long as it’s $10k or less. Thanks, Harry!
Bobby B says
Is the interest rate you receive from a purchased I bond locked in at the current rate or does it change every six months based on fixed plus inflation?
Harry Sit says
It changes every six months based on fixed plus inflation.
sscrla says
Understand the meaning of fixed. Fixed doesn’t change.
“The interest rate combines two separate rates:
A fixed rate of return, which remains the same throughout the life of the I bond.
A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U).” from Treasury Direct
MS says
Hi All,
A totally separate subject, is there any way to get paper I-bond other than the tax return? I owed money so I couldn’t do it this year. Paper I-bond has $5k allowance per person per year extra on the top of the electronic I-bond, is that right?
sscrla says
It is per tax return, so if you are married and file jointly, the limit is $5k total for the both of you. If you file separately, you can each get $5k. Obviously, if you are not married, your limit is $5k for your one tax return.
MS says
So no other way to get paper bonds other than tax return is that right?
Can I get gift paper bonds for the kids?
Harry Sit says
That’s right. You can use your tax refund to buy paper bonds for up to two kids (lines 5a and 6a on Form 8888).
MS says
Thanks Harry! I guess nothing to the wife if we file jointly…Also can I later convert them to electronic bonds?
Harry Sit says
The owner can deposit paper bonds into their online account. See How To Deposit Paper I Bonds to TreasuryDirect Online Account.
Marc says
All the Fed rate hikes this year got me wondering on what basis does Treasury Direct raise the fixed rate component of I Bonds? Is it a “behind the curtains’ mysterious thing they keep secret, or do they publish any criteria or threshold upon which that decision is made? Is history any guide on this?
Harry, what are the odds the November adjustment reintroduces a fixed rate portion of I bonds greater than 0%?
Harry Sit says
No published criteria. A person or a committee decides. I don’t know the odds. I’ll buy again in January if they raise it in November.
MikeG says
Harry, since you will know the rate for Nov in mid Oct, why would you not buy in Oct instead of waiting till January? You’d lock in 6 months at 9.62% that way before moving to the Nov rate.
Since I know you did some front loading (probably already bought 2023 and 2024), I am curious to better understand your though process.
FWIW, my wife and I bought our 2022 allotment in April and front loaded 2023 and 2024 in gifts for each other also in April.
Harry Sit says
We won’t know whether the fixed rate will be raised until November. We’ll only know the new variable rate in mid-October. If they raise the fixed rate in November, I’ll want the higher fixed rate. I already bought the full quota this year plus enough gifts. I can technically buy another gift in November and deliver an existing gift in January, but a regular purchase in January will work just fine.
MikeG says
Yes, we won’t know if the fixed rate moves off zero until November.
However, I think we can all agree that the largest component of the November rate will be the inflation component (not the fixed component – which is more likely than not going to remain at zero, where it has been for the last 5 rate resets). If the inflation component is attractive on its own (which it is likely to be), and if one were inclined to make a January purchase because of it, by making that purchase in Oct locks in 6-months of the current 9.62% rate for that purchase, whereas waiting till January misses that opportunity.
Further, if the purchaser had front loaded 2023 already with a gift purchase (as we have both apparently done), then the bonds bought in Oct would be a gift for delivery in or after 2024 (2025 in my case, since my wife and I have made gift box purchases with expected deliveries in 2023 and 2024 already). If we were to wait until January, that purchase would then either be for 2023 (pushing the previously purchased gift bond with expected delivery in 2023 out until 2024 or later) or it would be for 2024 or later delivery anyway. We would end up in a similar position either way, but worse off financially because we waited till January to make the purchase.
So, I am trying to understand your thinking as I am in the same boat and have concluded that I will make the decision to purchase another tranche in Oct when I know what the Nov rate reset is going to be and not wait till January. Want to make sure I am not missing or overlooking something.
Thanks,
Harry Sit says
That makes sense if you’re willing to push your last delivery to 2025. I’m not ready to commit to that far yet even if the variable rate is high. I get the high variable rate with my existing gift anyway. If they don’t raise the fixed rate I may just skip the purchase and move on to TIPS.
FinanceMom says
What are the estate/gift tax implications for this situation:
Wife purchases $50k in gift bonds naming husband as recipient and their child as beneficiary. Before gifts are delivered, both husband and wife die.
According to regulations, undistributed gift bonds are delivered to the named gift recipient upon the death of the purchaser and this amount is not subject to the annual purchase limit.
The bonds would be reissued to the child, but would they be considered part of the estate for estate tax purposes?
Harry Sit says
Delivered or undelivered, the bonds are the husband’s assets. Assets passed to the named beneficiary are still part of the estate.
FinanceMom says
That makes sense, but I’m trying to wrap my head around how it actually works. If husband dies first, would his death force distribution of the bonds to the child? Or do they sit in wife’s gift box until she chooses to distribute them,
If the bonds would part of husband’s estate, but the child is the actual recipient of the bonds (because husband died first), is it just like any other POD account or are there gift tax issues if the amount is over the annual gift-tax exclusion and the estate is subject to estate tax?
FinanceMom says
And would it make a difference if child was named as second owner rather than beneficiary?
Harry Sit says
TreasuryDirect doesn’t know the husband died until someone (presumably the wife) notifies them. Then it’s handled like other POD assets. It doesn’t make any difference when the child is named the second owner or the beneficiary.
FinanceMom says
I guess that is what I’m wondering about. What if no one notifies TreasuryDirect until after both the wife and husband have died. I’m thinking of a situation where wife buys the bonds as gifts naming husband and child but has forgotten about them by the time husband dies so Treasury is never notified and wife never delivers the bonds to child. Child learns about the bonds after wife’s death and the bonds are distributed to the child. The husband’s estate was closed years ago. Does the child have to amend the federal estate tax return to add the recently discovered bonds?
Harry Sit says
An ounce of prevention is worth a pound of cure. If you’re prone to forgetting, don’t pre-purchase gifts. Not earning some interest beats forgetting 100% of the money.
If you still want to pre-purchase gifts, document the hell of it. Add entries to the “Where’s My Money” document for the executor of the estate. Print out the web pages and add them to the statement folder. Use Google Calendar or the equivalent to set up recurring reminders each January for everyone:
Wife – Deliver gift to Husband
Husband – Ask Wife to deliver gift
Child – Mom has undelivered gifts in TreasuryDirect account XXXXX for Dad. I’m the beneficiary.
Leo says
Has anyone recently gifted an i bond to a spouse with success after maxing out their $10K limit? My brother just tried to do this & just got an email back saying that the gift will be refunded because he reached his limit for the year. Trying to figure out if it’s worth me & my wife giving this a shot. Thanks.
Sam says
My wife and I maxed out our annual limits and recently put 10k for each other in our gift box. Didn’t have any issues. We hope to deliver our gifts to each other on a year when we decide to not max our ibonds contribution.
MikeG says
I suspect your brother tried to purchase and then deliver the gift bond purchase in the same year they already purchased the $10,000 in I Bonds.
Harry Sit says
Your brother likely made the easy mistake that also tripped up others. See the “Avoid Mistakes” section. No problem with gifting if you do it the right way.
Leighton says
Leo, We had the same thing happen when my wife tried to gift to me from her personal registration. We got the same message – that they would return the $10,000 in about 10 – 12 WEEKS. (That’s ridiculous).
The secret is this: After logging in, you have to create a new registration – but in the name of the recipient, not you. Then FROM THAT REGISTRATION, you can buy the Ibonds. Somewhere along the process, there is a checkbox, saying that it is a “gift.”
Tip: If unsure about anything you do, try it first with $25. If it goes through OK, then buy the rest.
Dan A says
You have to hold the gift until a year that the recipient hasn’t reached their limit. example: next year, don’t buy I-bonds, and instead engage the gifts.
Steve says
I don’t see it explicitly asked: can you gift i-bonds without a treasury direct account?
My sister would like to put some money in my kids’ names. I assume she doesn’t have her own TD account. Can she buy and deliver I-Bonds without an account, but with their names and socials? Can I then create linked accounts for them from my own TD account and accept the gift on the kids’ behalf?
That said, it might be simpler if my sister just wrote me a check. I’m sure she trusts me enough to transfer it appropriately.
Steve says
Found the answer to my own question:
“To buy an electronic savings bond as a gift:
You must have a TreasuryDirect account”
https://www.treasurydirect.gov/indiv/planning/plan_gifts.htm#:~:text=To%20buy%20an%20electronic%20savings,must%20have%20a%20TreasuryDirect%20account
Dave says
Hi, Thank you! I found this website amazingly informative!
Question: I’m trying to figure a way to buy Ibonds for an unborn child.
Can I purchase it in my name and then next year gift it to my child?
If that’s not possible, can I add the child as a secondary owner at a later point, and if that’s done can a secondary owner do a cash-out (while the primary is still alive)?
Harry Sit says
If you buy it in your name, you can transfer it to your child at a later time. You’ll pay tax on the interest accrued up to the time of the transfer.
Alternatively, you can add your child as a second owner at a later time. If you also grant the transaction rights, your child can cash out while you’re still living but that won’t happen until your child turns 18.
Dave says
Thank you Harry.
Do you have an article describing the transfer option?
Harry Sit says
First you need to set up a Minor Linked Account for your child. See Buy I Bonds in Your Child’s Name. Then you log in to your account, go to ManageDirect, and click on “Transfer securities.” You’ll give your child’s account number and Social Security Number. If the online process asks you to fill out a paper form FS 5511, you follow the instructions on that form.
Dave says
Thank you for the info. Does it count towards my or my child’s 10k yearly allowance when “transferring securities”?
Harry Sit says
The principal value of the transfer counts toward the annual purchase limit of the recipient.
Dave says
So if I already purchased 10k this year (for both myself and my wife in return +5k return) I have no way of purchasing more for the unborn child?
I mistakenly just ran another 10k purchase for myself with wife in order to transfer next year to the child but realized that I may have gone over the top.. what will happen?
Harry Sit says
No one knows you intend to transfer next year. Only intending to transfer can’t increase your purchase limit. If the purchase is still pending, maybe you can cancel (ManageDirect -> View/Delete a pending purchase, or by calling customer service). If you can’t cancel, TreasuryDirect will notify you that you exceeded the limit and you’ll get a refund after some weeks.
Dave says
If I understand correctly when I purchase I-bonds in my account for myself it immediately counts against my 10k allowance for this year and I should not be purchasing more with my name as primary.
The only way to purchase more is to gift it to someone else?
So my option would be to gift it to my wife or my wife to myself and then next year the recipient can transfer securities to the new child?
(I canceled my mistaken purchase with my own name..)
Dave says
Thank you for all the information.
We did the gifting option.
Leo says
Are gift bonds to spouse, children & grandchildren considered future interest gifts for IRS gift tax purposes in the year of purchase?
Harry Sit says
It doesn’t matter when you gift to the spouse because the exclusion amount is unlimited either way. It’s a present interest gift when you deliver to children and grandchildren in the same year as the purchase. It’s not clear to me whether it’s a present interest gift or a future interest gift when you hold to deliver in a different year. I would deliver to children and grandchildren in the same year as the purchase to force it to be a present interest gift. See the “Gift Tax Form 709” section.
HW says
Hi Harry, here is the definition of “Future Interest” according to CFR 25.2503-3 (ALLCAPS are mine):
Ҥ 25.2503-3 Future interests in property.
(a) No part of the value of a gift of a future interest may be excluded in determining the total amount of gifts made during the “calendar period” (as defined in § 25.2502-1(c)(1)). “Future interest” is a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time. The term has NO reference to such contractual rights as exist in a BOND, note (though bearing no interest until maturity), or in a policy of life insurance, the obligations of which are to be discharged by payments in the future. But a future interest or interests in such contractual obligations may be created by the limitations contained in a trust or other instrument of transfer used in effecting a gift. A contribution to an ABLE account established under section 529A is not a future interest.”
My interpretation of this is that bonds are not counted as a future interest. I have no particular tax expertise – this is simply my own interpretation of the statute. Thoughts?
Harry Sit says
I’m not a lawyer. I think the reference to bond there only says that just because a bond pays interest and principal in the future, it doesn’t mean if you give someone a bond now, it must be a gift of future interest. It doesn’t say bonds are not counted as a future interest. They can be future interest depending on “limitations contained in a trust or other instrument of transfer used in effecting a gift.”
Ustaad says
Harry,
Your article is truly a great resource in the times we live in. Thank you. I would like to revisit the topic of premature withdrawal penalty which you addressed in reply to comment no. 61. Elsewhere, I have seen a different take on this issue and would very much like your opinion/confirmation on this matter. Treasury policy is such that you earn interest for the full month even if you own the bond for any part of the month. This is evident when you purchase at the end of the month. The bond issue date is always the beginning of the month. Then why is the reverse not true? That is, if the bond is redeemed at the beginning of the month, say on the 2nd of the month, you should be able to earn interest for that full month. This can be used to reduce the impact of the last 3-month interest penalty to the effective penalty of say one month plus couple of days or for all practical purposes to a penalty of one month. Assuming that one is opting for premature withdrawal in a declining inflationary environment, the impact of penalty is going to be minimal. I do not know of any bank or financial institution that will allow the depositor to get away with a 30 day interest penalty on a 5-year CD. My source for this information is a youtube video [Editor: link removed to avoid misleading others.] He talks about it quite transparently. I am bringing this up because you responded differently in your reply to comment no. 61 and I do not have any personal experience with this type of withdrawal transaction. Also, elsewhere in the comments section, I have read suggestions about the optimal time for premature withdrawal at around 15 months or so. Can you share your take on the optimum exit strategy should inflation come down at a faster pace than the current consensus view.
Harry Sit says
TreasuryDirect’s policy isn’t “you earn interest for the full month even if you own the bond for any part of the month.” Here’s the official policy:
“I bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I bond’s issue date. An I bond’s issue date is the month and year in which full payment for the bond is received.”
In other words, you don’t earn any interest for the month in which you redeem. You get the full interest in the month of the purchase but the early withdrawal penalty is still the interest earned in the most recent three months. When the rate gets low, you need to stay on the low rate for three months in order to keep the interest earned at a higher rate previously.
Ustaad says
Thanks for that clarification. So, for all practical purposes, should one put in the redemption request on the last day of the month (28th,29th,30th or 31st depending on the month) as there is a lag of 1 business day in execution or on the 1st of the month when balance amount changes?
Harry Sit says
Do it on the 2nd of the month to make sure you get the interest for the previous month. It isn’t worth risking a whole month by pushing a day or two.
Ustaad says
Thanks.
Annie Hedonia says
My SO and I have already purchased our $10K this year. I’d like each of us to purchase an add’tl -$20K for each other as gifts. I use the accrual method and report interest every year. How would this work on the $20K of bonds he intends to “gift” to me???
MikeG says
That’s an excellent question.
My guess is you would accrue the interest on the gift bonds in his gift box where you are the owner and he will do the same with the gift bonds in your gift box that were purchased as gifts to be delivered to him in the future.
As I understand it, even with the first $10,000 each of you have purchased, you will simply include in your tax return the accrued interest for each year. When you sell those bonds and the Treasury issues you a 1099, you will report the entire amount of interest from the 1099 and below that (on the tax form) you will have a line for “interest previously reported” where you will deduct the interest you’ve accrued in earlier years. I don’t see why the gift bonds would work differently.
I suspect you will get a reply telling you this issue is a good reason to accept the Treasury default and not accrue the interest each year 🙂
Harry Sit says
Sorry, I don’t know. You’ll have to figure that out yourself because you chose to go against the Treasury default.
Dunmovin says
A fly in the onitment may be whether it’s a current/future gift for gift tax purposes…can one owe taxes on that which they don’t own (yet)?
I still haven’t got any paper ibonds as a result of paper tax filings in February…Harry what happens if we don’t get the paper ibonds by (when)? Thanks
Harry Sit says
The IRS will process your tax return at some point. If you get paper I Bonds, the bonds will be dated at that time with the then-applicable interest rate. If they decide not to give you I Bonds, you’ll get the refund to your bank account (or by check).
Zach F. says
Thanks for the ideas! Where did you find that you could gift more than $10,000 per recipient per calendar year? For example, I would like to gift $20,000 to my spouse, by making two separate $10,000 purchases. This however, seems in conflict with what is stated on Treasury Direct. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#gift
From the Treasury Direct website:
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.
Harry Sit says
Because most people buy and deliver gifts in short order, this Q&A should be read in that context. Replace every “buy” with “buy and deliver.”
sscrla says
TreasuryDirect doesn’t always tell you the whole truth. You are better off reading the Code of Federal Regulations.
§ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year? [note, the correct word is acquire, not buy or purchase]
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
https://www.law.cornell.edu/cfr/text/31/363.52
Kris B says
Can I buy an I bond in my name with my adult child as a co owner. If so who will be responsible for interest when it is cashed in? This seems like a simple question compared to everything else that has been asked.
sscrla says
First, you have to understand that there is no “co-owner.” There is A with B, and B has no rights of their own, which is not what I would call a “co-owner.” And even if there were “co-owners” as there were with paper bonds, the interest is reported by the person who bought the bond.
” If a U.S. savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond generally is taxable to the co-owner who bought the bond.”
Publication 550, Investment Income and Expenses, page 7
Kris b says
I asked that question because I actually have an ibond several years old that has my husbands name and my name that says or. So that is why I thought I could maybe purchase one using the or with my adult daughter, thinking that she could also cash it but I would be responsible for interest. Think I will just give her the money and let her buy it. She could use it for college expenses for kids down the road without interfering with college loans, right?
Harry Sit says
If you give her the money and let her buy it, she has a chance to make the interest tax-free when she uses it for college expenses for her kids. It’s more difficult when you keep the bonds in your name. See Cash Out I Bonds Tax Free For College Expenses Or 529 Plan.
PBBG says
Harry Sid, Great articles, Thank you!
Just to be sure, given this situation:
year 1
My spouse buys 10k
I buy her 10k and keep it in the Gift Box
Year 2:
We do the same,
My spouse buys 10k
I buy her 10k and keep it in the Gift Box
Year 3:
She redeems her two 10k bonds
I deliver the two 10k bonds from the “Gift Box”
She redeems them right away.
By delivering them I have just exceeded her limit for the year.
Question:
Is this possible to do?
What if I deliver 10k, she cashes it in then I deliver the second 10k. Will this keep her under the limit?
Harry Sit says
Delivering $20k in Year 3 will exceed her limit but you may get away with it when she doesn’t buy any more. Delivering in multiple lots or cashing/not cashing won’t make any difference.
MO says
Hello,
Am I reading the scenario correctly that once the gift I Bond has been purchased for more than 12 months, it can be redeemed right after the delivery? Thank you for the clarification. Please see my purchases below.
For example, I purchased $10k in June 2022, and my spouse purchased $10k as a gift to me in June 2022. Assuming I don’t make any more purchases in 2023, the first gift can be delivered in January or June 2023. This gift I Bond can be redeemed in June 2023 or September 2023 to reduce the penalty impact, correct?
My spouse also purchased another $10k in July 2022 and planned on delivering it in January 2024. This gift I Bond can be redeemed in January 2024, soon after the delivery, correct?
Thank you in advance for anyone’s response and clarification.
Harry Sit says
That’s correct. Once delivered, a bond received as a gift is indistinguishable from a bond directly purchased on the original issue date in terms of interest, holding period, and early withdrawal penalty.
Ron S says
Has anyone accidentally bought too much and are expecting a refund? Any luck getting the refund? It’s been 12 weeks and counting for us.
Harry Sit says
Many people reported not receiving the refund and ending up keeping the extra bond.
Ron says
Oh so it just appears on your acct info screen?
Harry Sit says
You should still see the extra bond together with your other bonds.
Leighton says
Ron, It’s been 12 weeks for us too, whereas their email at the time said,
“You should receive your refund approximately 8 to 10 weeks from the date of purchase.”
We messaged them recently with their quote, and asked where is the refund,
But their reply didn’t even address the question, but instead was the same message one gets on initially opening an account, or probably on forgetting the password: something like “here’s your one time pass code…” Completely irrelevant to our question.
The $10,000 does still show up in the account, and I would think they would begin posting interest that purchase (being that the first 3 months early withdrawal penalty period will have passed – April, May, June.)
If they don’t apply interest, and don’t refund our money, and won’t answer email questions about it, then what???
Harry Sit says
Interest for July will show up on August 1.
Dunmovin says
I’ve started each purchase for each of my TD accounts with $100 in order to assure the process works! There have some hiccups on the road but I’ve then followed up with max for that account. Start small in case (as they will, given on the interest “now” in ibonds…pun intended) things go south!
Leighton says
We also started doing that, Dunmovin.
Then I wondered if the Feds going to consider that to be “structuring” to avoid the reporting of transactions of more than $10,000? Innocent people have their accounts seized because of that. It’s a shame we have to look over our shoulder all the time to see what our government might do next “to harass our people.” (Declaration of Independence)
Dun says
Can only buy a max of $10k and guess who’s getting $s? The feds. One can always be reported even if under $10k… your favorite FI will file a SAR…been there done that
Hoa Truong says
Hi Harry,
My spouse purchased 10K for himself. I purchased 10K as a gift with the intention of delivering it to him in a future year. However, I inadvertently delivered it to him 2 weeks after it was purchased, which pushed him beyond his annual purchase limit. What happens to my 10K? Is there a penalty? I read somewhere that if a person purchases i-bonds beyond their annual limit, that TreasuryDirect will refund the money, which can take up to 16 weeks. First, is this true? Second, if it is, would this apply to my situation, since he technically did not purchase the amount the took him beyond his limit; but rather it was delivered to him by me?
Harry Sit says
TreasuryDirect will notify you of any action they’ll take. If you don’t hear anything, carry on.
Hoa Truong says
I called TD this morning and this is what I was told. A team prints out a list. Accounts with excess purchases/deliveries will be notified by email and a refund will be processed. There is no penalty. Whether it was a purchase that pushed the purchaser over the limit or a delivered gift that pushed that recipient over the limit, the refund process is the same, and it could take up to 16 weeks. If for some reason TD does not issue your refund (i.e. it’s your first offense), then consider yourself lucky as they’ve decided not to do anything about it and to just let you keep the i-bond. In the meantime, you could continue to buy i-bond gifts and keep it in your gift box. Hoping to not hear anything from them and carry on, just like you said.
Hoa Truong says
I see. Thank you.
Dunmovin says
And no due process!
Toli says
Hi Harry,
I am aware that inheriting I bonds does not affect the annual purchase limit; as per CFR 363.52(c): “Bonds received due to the death of the registered owner are not included in the computation for the recipient. ” So far so good…
But consider this scenario: Bob purchases $50k of gift bonds for Sue. Being gift bonds, Sue (not Bob) is their owner since the time that Bob purchased these bonds. At the time of Bob’s death, the gift bonds have not yet been delivered. Bob’s death causes the delivery to occur. As a result of this delivery, Sue must apply the $50k towards her annual purchase limit in the year of delivery. 363.52(c) does not apply because the owner of the bonds was Sue from the get-go, and never Bob. Bob was the purchaser, not the owner.
If I had to guess, I’d say that the assumed intent of 363.52(c) was to cover such a case, so Bob’s death and gift delivery would not affect Sue’s annual purchase limit. But that’s only a guess. Is there some other regulation that is applicable in this instance? Something like “Bonds received via gift delivery due to the death of the purchaser are not included in the computation for the recipient. ”
Thank you.
Toli says
I think I can answer my own question, Harry, but please double-check and confirm… 363.96(e) states: “If the purchaser dies before delivering a gift bond to the recipient, the bond belongs to the owner named on the gift bond […]. We will hold the bond until we receive instructions from the owner named on the gift bond.” So delivery to Sue won’t happen automatically upon Bob’s death; instead, Sue could presumably contact TD and arrange a staged delivery ($10k per year for 5 years) so that her annual purchase limit won’t be exceeded.
Harry Sit says
I don’t know any regulation that covers this but I think TreasuryDirect will want to close out Bob’s account by transferring the undelivered gifts to Sue in one shot as opposed to dragging it out over multiple years. I read that someone was told by customer service to the effect of “The system may automatically generate a message saying you exceeded the limit but we’ll reset it if you call us.” That basically treats receiving undelivered gifts when the purchaser dies in the same way as inheriting bonds as a beneficiary.
MS says
Hi All,
Different subject: can anybody estimate what will be the interest rate on Ibonds in November if the inflation goes arond 7-8%?
Thanks,
MS
Harry Sit says
If you mean that the observed inflation will turn out to be 7-8% over the last 12 months by September, which means zero or negative inflation in the next couple of months because it has been higher than that so far, it’ll be 4-6%. If you mean that prices will continue to go up by 7-8% annualized in the next couple of months, it’ll be 8.5% – 8.9%.
MS says
Thanks! How do they get to that 9.62%, I believe there is a fixed portion which is zero and they multiply an inflation index by two?? What index is that and where is it right now?
sscrla says
FOR RELEASE AT 10:00 AM
May 2, 2022
The composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate. The 9.62% composite rate for I bonds bought from May 2022 through October 2022 applies for the first six months after the issue date. The composite rate combines a 0.00% fixed rate of return with the 9.62% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 274.310 in September 2021 to 287.504 in March 2022, a six-month change of 4.81%.
https://www.treasurydirect.gov/news/pressroom/currentibondratespr.htm
The November rate will depend on the CPI-U from March to September. The Bureau of Labor Statistics will release the September CPI-U on October 13.
September 2022 Oct. 13, 2022 08:30 AM
https://www.bls.gov/schedule/news_release/cpi.htm
dunmovin says
MS…I don’t want to steal anyone’s thunder but one should do some research on any, repeat, any investment before jumping in. I suggest one start with Harry’s multiple threads under Investment (above) dealing with Ibonds, eg “How to Buy I Bonds (Series I Savings Bonds): Soup to Nuts.” Excellent tutorial and q/a. For calculation of the next rate the CPI released on Sept 13 (for August) is important as is the September CPI released in Oct will enable calculation by anyone of the Nov. rate reset. Good luck
Harry Sit says
When 9.62% is high enough, I buy. It doesn’t matter how they got to it. When the rate is no longer competitive, I stop buying or I cash out and go somewhere else. I don’t go into the weeds even though I know how.
FinancialDave says
The number is out and by my calculation it is 6.48% annualized.
MS says
Got it, thanks for all the comments!
MS
Alan H says
I have an elderly Grandfather. Can I buy $20,000 of I Bonds and deliver $10,000 this year right away and leave the other $10,000 in the gift basket for 2023? If I am the beneficiary for both bonds and he passes away this year what happens to the delivered $10,000 bond as well as the $10,000 bond in the gift basket?
Harry Sit says
You can hold gift bonds in the gift box for future delivery. See the Purchase Limit section. When the gift recipient dies, the beneficiary works with TreasuryDirect to claim both the delivered and the undelivered gift bonds.
alan H says
Harry you are a wealth of knowledge thanks so much. So then theoretically what if I gifted and held in the gift basket $30,000 to my grandfather with the intention of giving him $10,000 per year in 2023/2024/2025. I name myself beneficiary. If he dies in 2022 does that mean I could collect all $30,000 when he dies? It sounds like it could be a valuable estate planning tool. Would that work? What would stop somebody from pouring millions of dollars to a terminally ill recipient and holding it in the gift basket until he passes? Is that actually legal?
Harry Sit says
Others had the same idea. See comment #73. Also keep in mind the estate and gift tax returns. Having the gifts come back to you eats into both your lifetime exemption and the recipient’s.
JiaRose Neuenkirchen says
Hello! I’ve been reading up and into I-bonds and I had a question!
I’m wanting to open one on October 6 (this upcoming), and I was curious to know how this works:
I am aware that the interest earned will be the same regardless if I buy it on the 6th or the 30th, however what I’m sure on is the date it is credited. I do know interest is credited the first of every month, but do I get the interest I earned the month of October on November 1st or would the interest already have been added on “October 1st” so the actual value is what I put in plus the interest?
Otherwise, as quoted from the treasury direct website:
“For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022.”
Does that mean that on January 1st, 2023 they would get the 9.62% interest they had earned on December?
Thank you!
Harry Sit says
If you buy in October, interest for October will be credited on November 1 but you won’t see it until February 1 because the display automatically holds back the last three months of interest for the potential early withdrawal penalty within five years.
JiaRose Neuenkirchen says
Thank you for your reply!
So in the following example;
For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022.”
They would in fact get the 9.62% interest they had earned in December?
Harry Sit says
Yes, you lock into an interest rate for six months before moving on to a new interest rate for another six months. Interest earned in December will be credited on January 1 but you won’t see it until April 1 due to the three-month lag in displaying it during the first five years.
JiaRose Neuenkirchen says
I apologize I meant to add in January in my previous comment.
As in the 9.62% interest rate will be applied (technically without the penalty) on January 1st to December value (hence up until Dec 31st)
Just confirming to ensure I understand it correctly
Harry Sit says
It’s not worth getting hung up on these technical details. Look at the big picture. 9.62% is a good rate. You buy when you think the rate is good. You don’t buy or you cash out when you have better options elsewhere. That’s all. The system works the way it does in terms of how the interest is calculated and when the interest is credited. You can’t do anything to change it. You’ll get all the interest the system says you’re due. You won’t be cheated.
JiaRose Neuenkirchen says
Thank you again and yes I’m sorry I do get hung up on details sadly! I didn’t know you had answered my question before I repeated it for clarification purposes as well.
Thank you for answering me and the countless other questions you get. I think I can speak for everyone when I say I appreciate the time and effort you put into it!
William says
Assume I purchase a $10,000 I-Bond as a gift and it accrues $1,000 of interest while sitting in my gift box before I deliver it. Does only the $10,000 principal portion count toward the recipient’s $10,000 annual purchase limit?
Harry Sit says
Yes, only the principal portion.
Mark says
I noticed on the example that you did not indicate entering the TIN for the Primary or Beneficiary. Is the TIN optional? Is it better to enter these?
Harry Sit says
The Tax Identification Numbers aren’t optional. You can’t move forward if you don’t enter them.
Jonathan says
I have already bought $10,000 of I Bonds (in August 2022) for each of my kids. Can my spouse now buy $10,000 for each of our kids as a gift (then gift it in January 2023)? I would cash all of these I Bonds after 15 months, so the first I Bond will be cashed in Nov 2023 and the other in Jan 2024. This would spread the interest over 2 years so that it does not exceed the kiddie tax limit for either year. Will this strategy work?
Harry Sit says
It works on the gifting side but where will the money go when you cash out on behalf of the kids? It has to go into each kid’s UTMA account or be spent on expenses specifically incurred by that kid. See Buy I Bonds in Your Children’s Names: You Can, But Should You?
Alan Heubert says
Harry, you wrote, “If you die before you deliver the gift, the gift still belongs to the recipient. Whoever handles your affairs after your death should notify the recipient that you had an undelivered gift for them. Then the recipient can claim it through TreasuryDirect.”
Question: Will that gift be treated as an inheritance, and thus not count against the recipient’s $10,000 annual purchase limit?
Thanks so much for your fabulous articles, and in advance for your clarification on this.
Harry Sit says
See comment #120.
Yunyoung says
Thank you very much for very helpful post!
Question: Another person already asked this question above where only the principal amount of the gift I bond counts towards the recipient’s annual limit. So does that mean I can technically gift more than 10k (say the principal was 10k + X amount of accrued interest) and not affecting going over recipient’s annual limit (assuming that the recipient didn’t contribute any on his/her own)? Would TD website automatically know to transfer 10k + x when I request to send my gift principal amount 10k?
Thanks in advance!
Harry Sit says
Each gift purchase is tracked separately. Think of it as a gift certificate with the principal value and the time of purchase written on it. When you deliver a gift, your gift recipient receives that specific gift certificate, which happens to be worth more depending on the principal value and the time of purchase.
Marc says
Thought you’d all find this interesting:
https://www.barrons.com/articles/treasury-series-i-bonds-limit-51664394878
Tom says
Thanks for the great post!
Regarding the statement in your post “Only a personal account can buy or receive gifts. A trust or a business can neither buy a gift nor receive a gift.”, can you tell me where you sourced this specific information. I have read all of the pages pertaining to gifting on the TreasuryDirect site and can’t find this restriction.
We have two revocable living trusts that hold I-Bonds registered in the names of the respective trusts. We were hoping to use this gifting capability to have each trust purchase another $10K of I-Bonds as a Gift for the other trust and deliver them in January 2023 (since each trust has already met its $10K 2022 purchase limit).
Harry Sit says
Search for “entity account” in the search box on the top right of TreasuryDirect’s website. The first link in the results.
Tom says
Thanks, Harry, for the very quick reply 🙂
In the meantime, I had actually also found my answer in the eCFR at https://www.ecfr.gov/current/title-31/section-363.96
Excerpt:
§ 363.96 What do I need to know if I initially purchase a bond as a gift?
(a) An entity may not purchase a gift savings bond.
Ustaad says
Recently, I read an article on yahoo about some proposed legislation by Senators Mark Warner (VA) and Deb Fischer (NB) on increasing the ibond purchase limit to $30,000 under certain economic conditions to help savers tackle inflation. Harry, if this proposed legislation which is bipartisan passes, what impact will it have on our ability to deliver previously purchased gifts, say next year? Will we able to deliver gifts upto $30K in spousal gifts without any negative tax consequences?
Harry Sit says
Most bills die in Congress. Thinking three steps ahead ends up wasting energy. I’ll assume the status quo until the laws and regulations actually change.
Charlie says
Harry, here’s a gift box question:
If you purchase these in your gift box for a relative nearing the end of life and don’t ever transfer them, then they become yours upon death, no matter the amount in that gift box, is that correct? Seems like a bit of a “hack”.
Do you expect the November reset to change the current 9.62 rate by much? Doesn’t seem like inflation has subsided much.
Thanks for all the great material on these and other subjects.
Harry Sit says
They become yours upon the recipient’s death only if you named yourself as the beneficiary at the time of purchase. Otherwise they go to the recipient’s estate. You can’t add a beneficiary to a gift after you purchase it.
The new composite rate to be announced in November will be a lot lower than 9.62%. I expect it to be in the low-to-mid 6% range.
Nikki says
We have purchased gifts twice this year following the instructions here and it worked fine. I wanted to lock in the rates before the end of October so we decided to purchase one more set of spousal gifts. This time I am getting an error and warning message saying I have exceeded my annual limit. I am on the BuyDirect page and have selected my spouse with me as POD from the registration drop down. I put in $10K and when I submit I get an error in red saying the annual limit is exceeded. We have tried to purchase gifts from both of our accounts (just like we did it 2 times before) and we are both getting this warning. Anyone else having this problem now? Is it possible they are no longer allowing multiple gift purchases for future years?
K says
Same problem here. Same prior experience. We did gifts in past using this method without issue. Trying to do it now (P1 and P2 are maxed for 2022, P1 buying as gift to P2 to be delivered in 2023) gets the following–
The following error(s) have occurred:
Annual limit exceeded. Please edit the purchase amount or edit your pending purchases under ManageDirect, if applicable, and try again.
Nikki says
According to this article Treasury Direct has recently updated its website (though it looks just the same as ever once you log in). Perhaps this error when attempting to purchase additional I Bond gifts is a technical glitch with the new site? I am hoping that might be the case rather than an indication that they have imposed a limit on gifts.
https://tipswatch.com/2022/10/04/treasurydirect-launches-its-revamped-website-sort-of/
Harry Sit says
I tried buying a gift for a family member for whom I haven’t bought any gift before and I got the same error message. Apparently they made this change with their recent website update. When they stop people from exceeding the limit upfront, they save themselves the trouble of having to reprimand people and process refunds. It appears they cast the net a little too wide though. Like many other things, you snooze you lose. Always try to get in early while the going is good.
Marc says
Can you be more precise for clarification purposes?
Is TD now imposing a new limitation or enforcing a pre-existing one that they did not enforce in the past?
Can an individual who purchased $10 this year for himself or herself still purchase a gift of $10K for another person? More than one person?
Dunmovin says
Harry, please don’t snooze…the TD website and, most importantly, the operative regs do NOT support this lock out. If the latter is intended there needs to be notice and opportunity to see regulatory changes BEFORE they are implemented…can we see your proactive message to TD and/or Treasury leadership? Thanks
sscrla says
Today is a Federal Holiday, so the result will be similar to a message sent yesterday, a Sunday, i.e., you probably won’t get a response.
Harry Sit says
Marc – It’s a new limit. As it’s currently implemented, you have one combined $10k limit between buying for yourself and buying as gifts. This change isn’t in line with the published federal regulations. If it’s brought to the attention of the right people, maybe they’ll fix it, but change will take time, possibly beyond the end of October when the 9.62% rate ends.
sscrla says
Regulations can change overnight, as they did for Social Security a few years back. They don’t have to give you advance notice. Perhaps the new regs will be published tomorrow.
Marc says
Harry,
Thanks for the response. I’m wondering if this new limitation, in addition to being in effect all of a sudden without notice, will apply retroactively to some previous date. Since there’s no official rule change published by TD, there’s really no way to know, although I think it unlikely just from a logistical standpoint of having to identify and refund so much money to so many people given the run on high yielding I Bonds this term. All we know for sure is that it’s preventing purchases from taking place today that are allowed by federal regulation and took place as recently as last week and go back years.
I think I have the timing nailed down. The minor “refresh” of the TD website took place on Tuesday, 10/4 (see this CNBC article here: https://www.cnbc.com/2022/10/04/as-demand-soars-for-series-i-bonds-treasurydirect-gets-a-makeover.html) but the limitation did not go into effect then. l I know for a fact that Gift I Bonds continued to operate under the previous accepted rules throughout the week even after the makeover. I Bonds ordered one day typically get purchased the next business day and I am aware of Gift I Bonds over $10K in total for the year being ordered as late as Thursday and transacting on Friday, 10/7. I think the new limit was put into place on Sunday, 10/9. It coincides with the following message on the TD website: “The TreasuryDirect application will be unavailable from approximately 8:00 AM ET to 10:00 AM ET on Sunday, October 9th, 2022, for system maintenance.” Nikki posted Message #137 on Sunday evening noting she hit the new limit despite ordering earlier in the year. The timing lines up.
We also don’t really know if the limit was intentional or inadvertent om the part of TD. Either way, it is a PR disaster in the making since few people know about it yet and coming on the heels of two senators calling for the exact opposite, to raise the limit to $30K per person per year (see this Barrons article here: https://www.barrons.com/articles/treasury-series-i-bonds-limit-51664394878). It also comes at the worst possible time for consumers and for public TD scrutiny due to the upcoming rate change
A conspiracy theorist might say that perhaps it was timed intentionally with the high rate going away in a few weeks. Either way, it upends an entire financial market at a time of great uncertainty and volatility while ending an accepted past practice.
I expect confusion, complaints, and controversy to ensue once more people hit the limit who didn’t hit it previously and the media gets a hold of this. TD would be wise to get out in front of it and post a statement online for clarity and transparency.
Harry Sit says
I think this is only an inadvertent technical implementation error, not a policy change. It’s a common practice to roll out system updates on Sundays. The website used to not check against the limit at the time of purchase. After the order goes through, they check the limit and send you an email saying you’ll get a refund. The refund process is manual. Sometimes they just let you keep the excess because processing refund takes too much work. It makes sense to add a check upfront, but they forgot to distinguish between buying for yourself and buying gifts. The limit check should only apply to buying for yourself. Although people reading this post are all interested in buying gifts, gifts probably still make up only a tiny percentage of overall purchases. They should’ve been more thorough but I can see why they overlooked making an exception for buying gifts. I expect this will be fixed eventually but it may take a while.
Facts says
Harry, do we recall that the Buff was not in the speculation business? Any plan forward by you all thanks !
Harry Sit says
The plan forward:
– Alert TreasuryDirect of this latest change and point out it shouldn’t be this way, which I already did this morning.
– Wait for a fix or see that it’s a change of policy. Either way, at least for now, no gift purchases can go through after you already bought the maximum for yourself. If the change becomes permanent, only buy for yourself in the future.
– No change of plan for existing gifts in the gift box.
Dunmovin says
Harry, very nice.
This is opportunity time! You need to consider talking to media….asking, why is TD doing this to the small consumers who are getting beat by inflation? TD should right this wrong. It was not properly promulgated or implemented…
Go for it!
Dunmovin says
Harry, is it time to follow up with TD and “ask” them to take all their recent “wonderful” website improvements DOWN, put up the previous one, and when the “improvements” are ready for prime time to re-post, i.e. why isn’t there an interim fix that is customer oriented?
Thanks!!
Harry Sit says
You have unrealistic expectations. Updating a government website isn’t like me updating a blog. They’re not going to roll back to the previous version only because of this bug that affects a relatively small percentage of users. At best, a fix will go in during the next release window on another Sunday. I’ll say that’s fast if it’s fixed by next Monday.
Dunmovin says
Ditto, here
I had already purchased maximum for me/spouse AND we each gifted “some” to the other and vice versa. Latter is reflected in gift box of each…less than $10k. Tried just now using the same registration as before for a gift to spouse (using the registration in TD file) pod me…token amount…same noted error message. I then entered a new registration with the same info as before and checked the gift box at the bottom and tried the same token amount for purchase and got the same error message.
Harry! Need help…I don’t want to have to get a workaround, i.e. a new spouse, the one i have is…well, I don’t want to trade him in!
I looked under TD news and saw nothing
Dunmovin says
PS
I have just noticed the notation in red under the “purchase amount” stating a maximum purchase of $10K …Harry, a “governer” has been in place and is NOT disclosed by TD!
Dunmovin says
With all due respect regulations cannot change overnight and even if they could why not ask why the purported change is not reflected in the website, ie why implemented w/o everything else being ready for prime time? Thanks
sscrla says
You used to be able to withdraw a social security application at any time, as long as you paid back all the benefits received. People would apply at their full retirement age, collect benefits, and then withdraw at age 69 and some months. At that point, they would get all their delayed retirement credits. As with other good deals, it was advertised too widely, and the rule that you had only 12 months to withdraw was added on Dec. 8, 2010. Because they wanted to close a loophole, they didn’t advertise it two months in advance.
This is the same situation. The good deal has been advertised too widely, and they want to close the loophole; they are not going to give you an extra two months to buy $40k of gifts.
Dunmovin says
Use to…Reread the due process clause…notice/comment is required. Or why is there a Federal Register and no conforming changes on TD website?
In the future do not complain if there is no notice of traffic speed and you get a ticket…on and on
andres perez says
I receive the following error message “annual limit exceeded” even though i followed the instructions to the letter and had the registrant set up as a gift. Thoughts?
Harry Sit says
See comment #137 and an update in the Purchase Limit section.
Marc says
The jig is up…
https://youtu.be/MChvdjJJH1k
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=346091&p=6912556
If you read some of the comments from the video, it seems people who have called TD have been told the I Bond gifting problem is a known “glitch” they are working to fix, which is the most logical explanation. If true, hopefully it will only take days and not weeks to fix as the timing is quite unfortunate.
Quality Acceptance says
And ANY IT professional would have a better beta/final acceptance testing…some management heads should update their cv!
Jason says
I bought a $10,000 I bond for my wife that I’m holding in my gift box to give her in 2023 (as she already bought $10k in 2022). My question is that the ibond I plan to gift her in 2023 is accruing interest and worth more than $10,000 at this point. Can I gift her the full ibond amount that is worth more than $10,000 (since the PRINCIPAL investment amount was only $10,000), or will I have to break it up over 2 years since the CURRENT value on it exceeds $10,000? Also, will there be taxes due the year I gift it to her or do those not occur until she cashes it (whenever that may be). Lastly, will the rate on the ibond continue along its normal glide path (depending on its date of purchase) or does it “update” to whatever the current ibond rate is once I gift it (I’d hate to lose out on any of the 9+ percent months because I gift it to her in January 2023 before it’s “moved thru” the full 6 months at that rate)? Thanks for any info you can share on my questions!
Spoonfeeder says
Jason, I’m sure Harry will provide a more politically correct response but my 2 cents: Aren’t your inquiries ones that should have been thought out before purchase?…Yes in my view. And, aren’t most answered in the excellent write-up Harry has as well as in the thoughtful replies to prior questions? Good Luck
Jason says
Thanks spoonfeeder for your response and sorry if these questions have already been asked. There were quite a few comments on this article and perhaps I missed one with a similar question/s as I scrolled thru. As far as the article is concerned, I did not see any of my posed questions specifically answered in it – it is a great article and 1 I used to guide my decision to buy as a gift for my wife earlier this year (and vice versa). My questions are minor technical inquiries to which the answers wouldn’t have swayed our decision to buy gift ibonds for one another anyway (and will impose very minimal impact on our financial lives regardless of there answers). My plan was (and still is) to call TD and ask, but just thought I’d drop a line here with a group who seemed knowledgeable on the topic first. Regardless, thanks for your response even if it didn’t contribute in any meaningful way to my questions.
MikeG says
Jason, see the response to question #128. You will be fine with the gift being over $10,000 due to the accrued interest.
Jason says
Thank you, Mike – appreciate it.
I should also clarify the “tax” question I posed as well in my initial comment – I am referring to interest accrued on the ibond (not gift taxes or anything like that). Thanks!
MikeG says
There are no gift taxes between spouses.
Interest rate does not change simply because you remove the bonds from your gift box and deliver those bonds to your wife.
Harry Sit says
The gift recipient owns the bonds from day one. The bonds are only kept in a different place. Earning interest and taxes on the interest work the same as other bonds the gift recipient bought for themselves.
Jason says
Thanks Mike & Harry – appreciate you taking a moment to better educate me on this. You guys are great and I found the original article super helpful. Have a great day!
Marc says
Doesn’t this seem right to you?
The new November 1 I Bond rate will be 6.48% calculated as follows:
296.808-287.504)/287.504=3.24% x 2 = 6.48% Annualized
This means an I Bond purchased over the last five months or in October will get the 9.62% annualized rate plus the 6.48% annualized rate for an actual one year interest rate of 8.21%.
The only way this could be different is if TD adds a fixed rate into the calculation. This has always puzzled me about I Bonds. Is the fixed rate there to encourage people to buy I Bonds when inflation is low, or is it there to reflect current market conditions? It seems when inflation was low the past few years, there was no fixed rate, and now when inflation is high, there is no fixed rate. What gives with that?
Harry Sit says
The fixed rate on existing bonds is fixed for the life of the bonds. If they raise the fixed rate above 0%, it will only apply to bonds bought between November 1, 2022 and April 30, 2023. The new bonds will start with 6.48% plus the fixed rate. They won’t get the 9.62% rate. The fixed rate is highly correlated to TIPS yields but there’s no set formula. Someone or a committee at Treasury makes that decision solely at their discretion.
Nicole says
Just found your note on the “inadvertent lock out” with the new website update preventing me from purchasing a gift for my nephew in October before rates drop. Time is MONEY and we are going to lose out. I really hope this gets fixed. What a mess.
Marc says
Since I was able to purchase a gift I Bond before the “website update glitch” occurred, I decided I would print out one of their announcement certificates so that I’d have something to actually give the recipient. They have a number of nice choices here:
https://www.treasurydirect.gov/savings-bonds/gift-a-bond/gift-announcements/
Unfortunately, this simple little feature is broken too, though I can’t say whether the recent update broke it or if it was broken beforehand.
When you go to the Gift Announcements page, some of the images are clear and some are blurred. Regardless of which type you choose, you get a “Page Not Found” error.
I had to go to Google Images as a workaround to find an image of one of their announcements that I could print out. What an embarrassment!
Harry Sit says
I see they fixed the gift announcements now. It’s a sign they’re working on it. I’ll check the gift purchase again on Monday.
Gift says
Soooo, gift announcements is fixed…Wow! Can’t make gift purchases yet the announcements can be made. Is the horse in front or back? This is absurd
Jim says
Harry, thank you for your work on understanding I bonds. In reading this today, I see a few broken links to the educational 2-minute films on delivery of gifts. I am sorry that TD left this for you rather than redesigning the website with broken links! I was clarifying that gifts can be delivered in part. For instance, I purchased two $5,000 gifts for my spouse to be delivered in future years. I could actually decide to delivered the gifts in $2,500 of principal amount, creating more flexibility to mix gift and purchases in future years, depending on fixed rates and future inflation rates.
Harry Sit says
I updated the links to their short videos on the new site. Yes, you can choose to deliver gifts in part, as noted at the end of the “Gift Box and Delivery” section.
Marc says
Harry,
Nice shout out in yesterday’s MarketWatch article focusing on the possibility of a fixed rate being included in the November 1 I Bond rate announcement. “Though there’s no way of knowing whether the U.S. Treasury will in fact increase the I-bond fixed rate in early November, Harry Sit of The Finance Buff, said in an email that he would be “disappointed” if they don’t.
You feel the fixed rate possibility is justified, huh? I agree, even though the decision-making process is still quite a mystery. It’s just, I’m not sure a small fixed rate in the tenths of a percent would really make much of a difference even if it becomes a permanent part of the next I Bond term. My thought is that it’s still preferable to buy I Bonds before the end of October, if possible, to lock in the higher interest rate for the next six months. If a fixed rate comes to fruition on In November and is substantial enough, one really doesn’t miss out. You can just wait until January and buy the November term Bond in the new year.
Then again, the author doesn’t know the difference between Dr.Spcck, the famous pediatrician, and Mr. Spock of Star Trek, so I have to take his advice with a grain of salt. “ As Dr. Spock once said on Star Trek, “A difference that makes no difference is no difference.” In this case, the right Spock does make a difference. 😂
On a serious note, nice to see you quoted as an expert about I Bonds in this article. It’s “richly” deserved.
Marc says
Article a link:
https://www.marketwatch.com/story/theres-no-rush-to-buy-i-bonds-11665771545
Harry Sit says
A higher fixed rate won’t make much difference for the bonds you buy in 2022. You’re still better off buying now to catch the 9.62% rate for six months. I hope they’ll fix the bug in buying gifts soon.
The fixed rate will make a difference for the bonds you buy in 2023. If they don’t raise the fixed rate, I’ll stop buying in 2023 and shift to TIPS. The yield on 5-year TIPS is +1.8% now. TIPS are a different beast but the yield is attractive. See More Inflation Protection with TIPS.
RT says
Regarding Gift Tax Form 709:
During year 2022 we contributed $10,000 to 522 plan. If I chose to gift $10,000 iBonds this month (provided website is fixed) to a friend will I have to fill out
Form 709?
sscrla says
I assume you meant 529. Is the friend the beneficiary? If not your total gift to your friend is $10k, and you don’t need to fill out a gift tax return (absent other gifts).
Dunmovin says
RT…read some of the other comments on gifting for outyear delivery to a non-spouse and whether or not it is a present or future gift for purposes of gift tax law, i.e.. not the Ibond “law.”
RT says
Yes I meant 529
MS says
Just read the article and got puzzled about the interest rate, it says if you buy in Oct you will get 9.62% until the end of March 2023, doesn’t the rate reset to the new 6.48% (+ possible fixed rate) in November 2022?
sscrla says
You get your rate for six months (the May rate; make sure you can count six months from October). For the next six months, you will get the new rate (the November rate). Rinse and repeat for the next 30 years.
rnam says
The Gift Box Purchase is working again. The error of exceeding annual limit no longer appears. Instead you get a boilerplate message warning you about $10K annual limit and that it will be refunded. No specific mention of Gift Box exemption to $10K limit.
Mariel says
Thanks for letting us know.
Harry Sit says
Now the purchase page correctly distinguishes buying for yourself and buying gifts. I tried buying for myself and I got the previous “limit exceeded” error message. I was able to proceed to the next page when I changed the registration to a gift. This stops accidentally exceeding the limit when you forget to select the gift registration.
While introducing a bug was unfortunate, the intention was good, and fixing the bug within a week exceeded my expectation.
Marc says
This disclaimer is new after ordering an I Bond and before the purchase transaction takes place:
IMPORTANT – As stated in the Code of Federal Regulations
The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds. Any purchase in excess of $10,000 is in violation of the regulation and will be refunded.
The excess bond(s) will be removed from your TreasuryDirect account and refund will be made to the bank account of record. Continued violation of federal regulations may cause your TreasuryDirect account to be closed/suspended.
Helpful tips:
The limit is applied per social security number (SSN) of the first-named registrant or employer identification number (EIN) of an entity.
You may purchase additional Series I bonds in TreasuryDirect using your IRS tax refund, in accordance with IRS guidelines, up to $5,000 or your refund amount, whichever is smaller.
If this purchase will cause you to exceed the $10,000 annual limitation, a refund of the full purchase amount will be made to the bank account where the purchase originated.
NOTE: It may take up to 12 weeks to receive your refund.
Do you want to proceed?
Even though it’s qualified with the “book-entry” phase, the first sentence (and the second sentence) could easily be misconstrued by purchasers as including gifts in the $10,000 limitation, which we know is not the case. Wouldn’t it make sense to add “excluding I Bonds purchased as a gift” somewhere in the text to acknowledge that gifting is not only legitimate but encouraged?
Dunmovin says
Marc, what would really be nice is the solicitation by TD of public comments on proposed changes. I sent a message to TD suggesting same which was to no avail…those with media connections can make it happen! The problem I found is the terminology is different…no consistency. I purchased some gift ibonds Sunday and today on various accounts…and everything seemingly is going ok…but who really knows…no way to manage an organization…no free pass from me!
The real big problem is those with trusts and perhaps earlier being driven to legally wrongfully changing a title merely b/c of punctuation! Seriously!
Then there is… what else was changed which we don’t know about!
Auditors luv these inconsistencies…again where is the IG?
Marc says
You make some valid points about the need for public input beyond calling or emailing the TD representatives. My observation was specific to gifting because it is NOT allowed and encouraged bit also a limit workaround, and yet not mentioned in that disclaimer which displays when buying a gift. That wording can easily be misconstrued to mean gifting is forbidden over the limit when it is not. I can see someone reading that disclaimer and questioning whether to proceed with a gift after reaching their personal purchasing limit. It is a very heavy-handed message, which would be fine if the wording and meaning were crystal clear.
Regarding the media, I am still shocked that only Harry, one financial YouTuber, and a message board were the only places I could find online which mentioned the gifting glitch. Even with all the attention I Bonds have gotten because of the 9%+ interest rate, I couldn’t find a single mainstream article from a major news or financial outlet mentioning it during the week it was down. That’s almost unheard of in today’s media overload culture.
Lastly, I don’t want to beat a dead horse, but the mystery of how and when the fixed rate is determined absolutely needs some degree of transparency. I love a good mystery, but not when managing my finances.
Harry Sit says
This tells us again that gifting is only a secondary or tertiary use case in the whole operation. It felt like the whole world to some of us when it was down for a week but the rest of the world carried on not noticing it. Most people don’t think about gifting when they read that message because they don’t even know that gifting is an option. So don’t read too much into it when gifting isn’t specifically called out. It’s a corner case in the grand scheme.
Marc says
* “not only allowed and encouraged but also a limit workaround”
Paul says
Hi Harry,
Thank you for the great articles on I-bonds. I have learned a lot from you in very little time because of your very clear research, thoughts and style.
Regarding the I-bond purchase limits for an individual each year, TD once again allows me to buy gifts for my spouse, even though I already bought myself a $10,000 I-bond earlier this year as well as a prior $10,000 gift I-bond for my spouse also this year. I am inclined to buy another $10,000 spousal gift before Oct 28, but must admit that the message about exceeding limits and getting refunds of over-limit purchases and possibly having my account closed for abuse was a bit daunting (as well as not very clearly written regarding gifting). I am pretty sure you stand by the interpretation that buying multiple $10,000 spousal gifts within a year is allowed as long as delivery is duly spaced to avoid the spouse receiving or purchasing more than the $10,000 per year. Is this correct? Also, would you happen to know which regulations establish all these limits. The TD warning vaguely references some limits, but not in a precise way that one could look up. Though I do assume the regulations are written in a style impenetrable to those of us with only an understanding of standard English, and not legalese.
Thanks again for your wonderful articles. Each one I read makes me want to read more from you.
sscrla says
The regulations are not that hard to read, but one needs to be careful. For example, the word “you” is defined in 31 CFR 363.6
“You or your refers to a TreasuryDirect primary account holder.”
Also, the regulations do not have a purchase limit, but an acquisition limit.
“§ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?”
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.”
This is where you need to know what “you” means. You also have to know what “book-entry” means, as well as “acquire.”
It may seem daunting, but you can read the words for yourself.
Harry Sit says
Nothing changed with that message. Everything in that message is true and accurate. It doesn’t say anything about gifts. So don’t read what it doesn’t say.
M. Anderson says
It is pretty clear from subsection (b) of CFR 363.52 that bonds purchased or transferred as gifts are “included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.”
That language seems to suggest that gifts received are not included in the definition of “acquire” in subsection (a). If they were included in sub-section (a), then sub-section (b) would be superfluous. A basic principle of construction in the law is that interpretations that render language superfluous are to be avoided.
My reading of these sections is as follows:
1. You may only acquire (e.g., buy) $10k for yourself each year. See 363.52(a). I agree with Harry that “acquire” could included receiving as a gift, but if that were the case, then there would be no need for subsection (b). My reading of subsection (b) is to indicate that gifts received are unlimited, but the amount of the gift is included in the calculation of how much you can buy for youself.
2. If you receive a gift, that gift is “included in the computation of your limit” for purchases that year under subsection (a). See 363.52(b). Note that this doesn’t mean that you have a limit on gifts received. It just means that if you receive a gift, it goes towards your purchase limit, and can impact your future purchases during the year of receipt.
3. You may only purchase $10k per receipient as a gift each year. 363.52(c).
So, if you receive a $10,000 I-bond as a gift on January 1, 2022, it will go towards your limit for that year. 363.52(b). If you try to buy an I-bond for yourself on February 1, 2022, you won’t be able to do so. You reached your limit when you accepted the gift on January 1, 2022. 363.52(a). But, if someone else bought you an I-Bond that year, they can deliver it to you anytime that year. That’s because, per (b), bonds purchased as gifts or transferred as gifts will be included in your limit for acquisitions ( purchases) but not for receipt of gifts.
Similarly, if you purchase a $10,000 I-bond on January 1, 2022, and then receive a gift of a $10,000 I-Bond on January 15, 2022, you can accept the gift. There’s no limit on the receipt of gifts in any particular year. The gift will go towards your limit, but since you’re already over the limit, it won’t matter.
Here’s the full-text of CFR 363.52:
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.
(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.
Marc says
#3 can’t be right.
“3. You may only purchase $10k per recipient as a gift each year. 363.52(c)”
363.52(c) literally states “Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. ” it says nothing about limiting gifts to a single recipient.
It is somewhat common to purchase more than $10K per gift recipient in the same year (to be delivered at a later time). Harry concurs in the article we’re all commenting on here.
M. Anderson says
So, are you saying that I could buy $1,000,000 worth of I-bonds for a single recipient, right now? Cause that definitely doesn’t seem correct.
Alex says
Very helpful post. Question below. If both spouses follow this strategy and buy each other 5 bonds at $10k each ($50k times two), keeping it in the gift box. Can 5 years later both spouses deliver all the bonds ($100k in total of principle between the 2 spouses) to each other in the same year, given that in that year they won’t purchase any more bonds? If the answer is “no” because of the $10k annual delivery limit, can these be delivered and sold right away (paying taxes on the compounded interest gain)?
Alternatively, do accumulated bonds in the gift box can only be delivered at $10k annual maximum, even if that bond would be sold on delivery from the gift box that very same year? (That limitation if true would make it less attractive for large accumulation due to a long term lock-in)
MikeG says
Not sure the answer to this question, but why not deliver each tranche on January 1 of each year. That is what we are planning to do. The recipient of the gift could then do whatever they want with the bonds (sell or hold). Only downside I suppose to this approach might be that one could be precluded from buying bonds in each year that a gift of $10,000 was delivered to them?
Harry Sit says
Selling right away after delivery doesn’t change anything if you can’t deliver in the first place. Whether you can deliver $50,000 of principal in one year depends on how you read the word “acquire” in the federal regulations quoted by sscrla, which interestingly isn’t defined elsewhere in the regulations. If you read conservatively, receiving a gift delivery is a form of acquiring, and therefore the maximum is only $10,000 of principal in one year. If you read aggressively, receiving a gift delivery isn’t a form of acquiring, and the gift amount is only “included in the computation of this limit [for acquiring].” Therefore, if you receive $50,000 of principal in one year, you have used up the $10,000 acquisition limit for the year, which only means you can’t buy more I Bonds for yourself but receiving the gift delivery itself isn’t a problem.
Whenever the answer isn’t clear, we should also pause and ask whether we really need the technical answer. Going the conservative route always works. If you truely will hold for five years, it’s better to buy TIPS at 1.8% above inflation anyway versus the current 0% plus inflation on I Bonds.
Dan A says
I’m hoping for a good answer to the same question by January: Can we deliver our multiple gifts to each other Jan 2023, or do we need to space them out @ $10,000 / year?
Dunmovin says
Harry, when the TD site was down last week I initially thought that perhaps my gift registration may have a flaw. Consequently i reentered/new registration…which didn’t accomplish the goal of making new gifts. Now there are 2 similar registration in the pull down…we all know how to add…how do we delete a registration? Thanks
Barbara Pellerino says
Go on to Manage Registration and it will give you the option to delete registrations.
Dunmovin says
Barbara, thanks, you pointed me in the right direction and I deleted one…manage my account…then Update Registration List…and I was there!
Follow on Q…I also have two duplicate Registrations and have used each, ie in my gift box and under each are the gift box purchases…I suspect it’s better to leave those 2 alone. Thoughts?
Harry Sit says
A registration is copied onto the bonds you buy. Deleting a registration from the registration list only means you can’t use it on new bonds you buy next time but it doesn’t affect the bonds you already bought. It’s like burning the blueprint after you build a car. The car still has the design after the blueprint is gone.
suncoaster says
Dunmovin – I’m not Harry, but here’s what worked for me in deleting a registration (I tried the same thing you did with the same unsuccessful result). Go to the Manage Direct button at the top of the page and press it, then select Registration List. When the box containing all the registration names appears, select the name you want to delete, then look down and there will be 4 buttons labeled Add Registration, Preferred Registration, Delete Registration, and Cancel. Click Delete & you should be good to go. Hope this works for you.
suncoaster
suncoaster says
Sorry everyone, I didn’t see Babara’s post. And yes, Dunmovin it’s probably best to leave them alone, I did.
sscrla says
I agree with Harry that you can read 363.52 (b) two ways, but don’t ignore part (d). If they see you as playing games with them, they can just return the money (without earned interest – “payment price”).
§ 363.52 What is the principal amount of book-entry Series EE and Series I savings bonds that I may acquire in one year?
(a) The principal amount of book-entry savings bonds that you may acquire in any calendar year is limited to $10,000 for Series EE savings bonds and $10,000 for Series I savings bonds.
(b) Bonds purchased or transferred as gifts will be included in the computation of this limit for the account of the recipient for the year in which the bonds are delivered to the recipient.
(c) Bonds purchased as gifts or in a fiduciary capacity are not included in the computation for the purchaser. Bonds received due to the death of the registered owner are not included in the computation for the recipient.
(d) We reserve the right to take any action we deem necessary to adjust the excess, including the right to remove the excess bonds from your TreasuryDirect account and refund the payment price to your bank account of record using the ACH method of payment.
Dunmovin says
All…this recent discussion reflects original suggestion…there should have been an opportunity to comment…shame on Treasury, ie TD! Reasonable people may differ but if comments were rightfully solicited the agency should state at time of implementation why other “inputs” were not implemented. Finally there should not be any of this “foolishness” just before a new rate date! Did someone say sham(e) on TD?
Marc says
If I had $1,000,000, I could buy a lot of things, why not bonds for a single recipient? 🤷♂️
I’m not sure if there’s an upper limit in the regulations, but if you did buy $1,000,000, it would exceed the annual gift tax exclusion by $984,000 and it would take you 100 years to deliver the entire amount. So practically speaking, the reality of the $10,000 delivery limit imposes a soft ceiling ion the purchase of gift I bonds.
Harry can give a better answe, but here’s what TD has to say:
How much can one person or entity own in savings bonds?
There is no limit on the total amount that any person or entity can own in savings bonds.
How much can I spend each year on savings bonds?
We count the limits by the Social Security Number of the first person named on the bond or, in the case of an entity, by the Employer Identification Number or Social Security Number.
A given Social Security Number or Employer Identification Number can buy up to these amounts in savings bonds each calendar year:
$10,000 in electronic EE bonds
$10,000 in electronic I bonds
$5,000 in paper I bonds that you can buy when you file federal tax forms
Notes:
Gift bonds count toward the limit of the recipient, not the giver.
If you have an individual account and an entity account in TreasuryDirect that use the same Social Security Number, you can purchase up to the limits in each of the 2 accounts.
What about bonds . . .
that I co-own?
If you co-own savings bonds with someone else, only the bonds for which you are the first named owner count toward your limit.
Savings bonds for which you are the second named owner do not count towards your limit. They count towards the limit of the other person – the one who is named first on the bonds.
What about bonds . . .
for my children?
Each child has their own Social Security Number. Therefore, no matter who buys bonds for the child, the amount of those bonds counts for the child’s limit – not the limit of the buyer.
When you open a linked account in TreasuryDirect for a child under 18, the bonds in the child’s linked account belong to the child. You do not own them. Therefore, they do not count in your limit.
Each child has the same yearly limit: $10,000 for electronic EE bonds; $10,000 for electronic I bonds; $5,000 for paper I bonds.
What about bonds . . .
I give as gifts?
This is just like the situation with your children. The gift belongs to the person to whom you give the bond. Therefore, the amount counts in that person’s limit, not in your limit.
The gift counts for that person’s limit in the year in which they get the bond.
While the gift is sitting in your TreasuryDirect account waiting to be delivered, it is in a special “gift box.” So, even then, it is not yours and does not count in your limit.
https://www.treasurydirect.gov/savings-bonds/how-much-can-i-spend-own/
suncoaster says
Harry & Others – I’m having trouble buying additional I Bonds as a gift. In the Buy Direct section of TD, I select the registration I used to buy my wife’s gift I Bond last month. I then get a warning notice below the Purchase Amount window which says (in bold red print) “* Annual Limit is $10,000”. If I try to make a purchase, I get the warning others have mentioned. I even deleted the old registration and then re-entered it making sure I checked the Gift Box, but still got the same warning. Can anyone tell me what I’m doing wrong? Thanks in advance.
Dunmovin says
Registration I used for gift purchase to spouse is
Spouse name POD your name
Harry Sit says
Everyone gets the bold red print on the order entry page and the long warning message after that. Those aren’t specific to your purchase or to gifts. They just want everyone to see and acknowledge the annual limit.
Steve says
I got the warning, decided to double check the registration was marked as a gift, which it was so I went back to buy bonds under that registration, but then the page timed out, so I tried to refresh, which eventually loaded, but claimed I had used the back button even though I hadn’t, so I had to re-log-in to the site. But it did work the next time I tried.
suncoaster says
Dunmovin and Harry – Aha! I was being scared off by the long warning on the page that appeared after pressing the purchase button. Purchases for each of us seem to have gone through without a hitch. Thanks for babysitting me!
MJ says
Hello Harry,
My TD account has got locked and I am unable to unlock the account and purchase new I series Bonds for myself?
What options, do I have to reinstate my account – My TD account was created in 2000?
MJ
Dunmovin says
Wow! My business account was locked after/during set up but was quickly resolved with calls when TD was “doing customer service”. But the Q is what we’re you doing? Inactive? Facts?
Harry Sit says
Call customer service at 844-284-2676. Or fill out Form 5444 and get a signature guarantee.
Ames says
In reading Marc’s 10/17 post which quotes the TD disclaimer, I am wondering if their statement means there’s no more point in requesting my tax refund in I Bonds. Or maybe it is different with a paper bond refund, as in past years? I had been sure to have enough taxes withheld in December for this, so will need to figure it out by then.
” You may purchase additional Series I bonds in TreasuryDirect using your IRS tax refund, in accordance with IRS guidelines, up to $5,000 or your refund amount, whichever is smaller.
If this purchase will cause you to exceed the $10,000 annual limitation, a refund of the full purchase amount will be made to the bank account where the purchase originated.
NOTE: It may take up to 12 weeks to receive your refund.
Do you want to proceed?”
Harry, you have made a very big difference to my financial well-being. Thank you so very much!!
Harry Sit says
Paper bonds from the tax refund are separate just as before.
Marc says
Ames,
The $5,000 worth of paper I Bonds that can be purchased with a tax refund is separate, and in addition to, the $10,000 annual electronic I Bond purchase limit. That has not changed despite the somewhat ominous and cryptic wording of the disclaimer.
I’ve always thought it’s cumbersome and awkward to try to manipulate one’s tax liability to max out on buying a savings bond. I think gifting is a superior, safer, and more lucrative strategy, especially with a spouse, and has the advantage at this moment in time of being able to lock in the 9.62% rate for the next six months when we know the next predicted rate is more than 3% lower than that, as opposed to waiting until 2023 to do your taxes when this high rate will be fond memory.
Steve says
How do you even use your tax refund in Treasury Direct, directly?
Manipulating one’s tax withholding (not liability, directly) isn’t too hard if you just file an extra payment with an extension in January, when you can have a pretty good idea of your taxable income and taxes for the prior year. That’s what I’ve done the past two years. Just because you file an extension doesn’t obligate you to wait past April 15th to actually file your complete taxes.
sscritic says
Steve, the instructions to form 8888 (2021) provide a link to treasury direct.
“You can request a deposit of your refund (or part of it) to a TreasuryDirect® online account to buy U.S. Treasury marketable securities and savings bonds. For more information, go to http://go.usa.gov/3KvcP.”
The joke is that the link is dead. Blame the IRS or Treasury Direct, your choice. Perhaps the 2022 form 8888 will have a correct link.
Ames says
Harry, thank you for replying–and in three minutes flat!! Very grateful for all that you share, financial and otherwise. It matters.
Mike Bennett says
Thank you so much for this very informative and helpful article.
So – if a couple were making high earnings (and tax bracket) for a period (or a career with uneven earnings (feast/famine)) and limits on what they can squirrel away in an IRA, could they theoretically gift $300,000 each to the other (with the gifter as the beneficiary) in a tax-deferred investment, so it could all be take out before they mature, and an additional $10K each year (or total $10K each x (the number of years they gift + 29), as a maximum?
Tom H says
Good question. If there is no limit to what can be purchased and stored in your gift box for your spouse, with yourself as beneficiary, and with no intention of ever delivering the I bonds, the $10.000 limitation seems to disappear. If your spouse is old and won’t live 30 years, you will inherit your gift box bonds if your spouse is first to die, or Treasury Direct will deliver your gift box to your spouse if you are first to die. Can it be so simple?
Harry Sit says
The intention to deliver and cash out will appear when other investments (including new I Bonds) start beating inflation and you wonder why you’re sitting on this thing that only matches inflation.
Mike Bennett says
Mr. Sit,
I realized the risk of permanently buying no-real-rate I Bonds that being stuck with that option – alternatively, I had loaded up on I Bonds in recent years in the era of negative-return TIPs, but am now preparing to offload all these I Bonds in the spring to buy return-optimized TIPs again (while still retaining my big stockpile of 2001-2003 I Bonds, which had 3-3.4 percent real returns, and the good old days of $60K/person/yr purchasing). What my proposed massive I Bond-gifting option might do to protect one from future legislature that is probably likely to reduce the attractiveness of future I Bonds (like they did when reduced the annual purchase limit from $60K to $10K), or further reducing purchase limits, letting I Bond real returns go negative like TIPs (gasp) or ending the program in total in the future. One could always sell those I Bonds in the future and buy positive-return TIPs at any time they are generating a better return (like now), but in the meantime it would also protect your stockpile from long-term deflection, while it is in “limbo.”
Mike Bennett says
long-term deflation, I meant to say.
Nick says
“One could always sell those I Bonds in the future and buy positive-return TIPs at any time they are generating a better return (like now)…” – In your example of gifting $300k to each other, wouldn’t you still be limited to delivering only up to $10k per year? If so, then you wouldn’t be able to quickly sell the I-Bonds and buy TIPS when they have a real yield (like now), right?
Marc says
Oh boy…
Treasury Says Orders for I Bonds With 9.62% Rate Might Not Be Completed by Deadline
https://www.wsj.com/articles/as-investors-scramble-to-buy-i-bonds-treasurydirect-site-has-outages-11666817951
Dunmovin says
To paraphrase…you snooze, you lose
John says
The I-Bond gift is considered a “present interest” gift in the year when it is delivered to the recipient IMO because it will count towards the recipient’s purchase limit in that year.
John says
Also at that time, both the principal and interest will be considered as gifts.
Dunmovin says
John, you are one of the few, if any, that have dared to go before on the gift tax issue. Any authority for such boldness? And what is it called at the time purchase for gift box before delivery…for gift tax purposes…all for nonspouse?
Marc says
According to Harry in this article (as well as other sources):
Buying I Bonds as a gift counts as a completed gift in the year of the purchase (not the year of the delivery). There’s no limit on how much you can give as gifts to your spouse (unless the spouse isn’t a U.S. citizen). Each person has an annual gift tax exclusion amount for “present interest” gifts to each non-spouse recipient, which is 16,000 in 2022. If the total “present interest” gifts (in I Bonds and other forms) during the year from one specific giver to one specific non-spouse recipient go above this annual gift tax exclusion amount, you’re required to file a gift tax return on IRS Form 709.
Dunmovin says
Marc, “ It’s not clear to me (Harry) whether the I Bonds you buy this year as a gift but hold for delivery in a future year count as a “present interest” gift or a “future interest” gift. .” No need to say more!
Marc says
Dunmovin, I think you need to quote the sentence before as well for the full context:
“ You’re always required to file a gift tax return when you give “future interest” gifts to anyone except your spouse. It’s not clear to me whether the I Bonds you buy this year as a gift but hold for delivery in a future year count as a ‘present interest’ gift or a ‘future interest’ gift.
For clarity, the word “non-spouse” in the sentence you quoted is implied meaning if you are loading up on Gift I Bonds for your spouse to deliver in future years, the tax issue is moot whether or not it’s a present or future interest gift.
Marc says
It looks like the I Bond Fixed Rate is 0.40% and the Inflation Rate is 6.48% for a Composite Rate of 6.98%. Thoughts?
https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/
Marc says
6.89% (typo correction and rounded).
Dunmovin says
Harry (others?)…given the current base rate for new Ibonds any thoughts/concepts for the next 6 months or…at various points as well as for short/long term buying/holding of same? We haven’t see this in awhile ….thanks
Harry Sit says
Still good as a short-term investment but TIPS are better for the long term. I will deliver gifts in 2023 but won’t buy new gifts. New money will go to TIPS. Possibly will sell 3 months after the end of the 9.62% period or 3 months after the end of the 6.48% period.
Morgan says
Does the bond still earn interest in the time after delivering the gift and before the recipient cashes it out? Seems like it may be a silly question, but I can’t find the answer anywhere!
Harry Sit says
Absolutely. The point of a gift is for the recipient to hold it and earn interest, for up to 30 years after the original issue date.
Matt says
Harry,
Can I have two bank accounts at TreasuryDirect or will they delete my old one if I add a second bank account? And do you know if I can use a notary to authorize the bank account change form?
Thanks. Matt
Harry Sit says
You can have multiple bank accounts. The official bank change form still says “Notary certification is not acceptable.” You can call customer service to add a bank account now. It might be easier and faster than using the bank change form.
Harry Sit says
Someone reported that you can add a bank account online now.
Brian C says
Hi Harry, thanks for the great resource. My spouse and I have gift ibonds purchased in 2022 at a 0% fixed rate sitting in our TD gift boxes. What do you think about not delivering these in favor of purchasing new ibonds at the new fixed rate? How does one analyze this scenario?
Harry Sit says
If you like the new fixed rate, deliver the existing gifts and buy new gifts at the new rate for the gift box. The delivered bonds will be eligible for cashout sooner than buying new bonds outside the gift box.
Brian Cassell says
Thanks!
Marc says
I like your answer above and would like to take it a step further. The first two months of the next inflation calculation for I Bonds are in the books:
Oct: 0.4%
Nov: -0.1%
Although we don’t know the future, that extrapolates to a tentative 0.9% I Bond inflation rate adjustment on May 1. Thusly, I am waiting until mid-April to decide whether to buy additional Gift I Bonds in 2023 to capture the 6.89% annualized rate including the 0.4% fixed rate. In the meantime, I have money invested in a short-term T-Bill that matures in April.
Hypothetically, 6.89% annualized for 6 months and 0.9% annualized for 6 months comes to 3.895% annualized (3.445% + 0.45%). This figure is prematurely calculated with only 1/3 of the data, but I think it’s realistic to say that’s probably close to the low end of what to expect. I think the one thing that’s fair to say the next I Bond inflation rate will likely be lower than the current one.
With that in mind, I wonder if we can also assume the next Fixed rate component will be lower or put back to 0%. We know it’s a mystery, but I found it interesting that when the inflation rate dropped from May to November, TD increased the fixed rate component from 0% to 0.4%. I doubt that is historically common, because then we could anticipate another raise in the fixed rate as the inflation rate drops. It seems counterintuitive to assume that would be the case.
That leads one to conclude that the current I Bond with its 0.4% fixed rate could be the most attractive to buy for a while even though 0.4% seems negligible). Or do you have a different view looking ahead?
Dunmovin says
And, 3 months into the new May 1st rate may be a good time to redeem
Marc says
Dunmovin, yes, that could turn out to be a good time to redeem a 0% fixed rate I Bond. Or if inflation continues lower in 2023, a better time might be three months after the November 1 rate is applied which also pushes the taxable interest into 2024. But that’s so hard to predict.
I’m more curious about the cost benefit of purchasing the current I Bond in April. The last time the fixed rate was > 0.5% was 2008 so 0.4% is historically decent. It would be good to hold an I Bond with a fixed rate, unless a better fixed rate comes along. With inflation decreasing, I wonder if TD will raise the fixed rate to incentivize I Bond purchases. They really need to take away some of the mystery surrounding that decision.
Dunmovin says
Marc, I just placed a redemption order for small $ amount from trust to test the process…will go thru o 27th. I still think I’ll buy more in late January
Marc says
Makes sense. Good luck.
Sam says
Harry,
I am trying to deliver a 10k gift from the gift box to my wife. Before I hit the submit button I noticed the original 10k has now accumulated interest (total amount 10,400). If I go ahead with the submission of the entire 10400 will I surpass the 10 per year limit. If select partial amount and deliver 10k what happens to the interest amount(400).
I essentially want to deliver last years gift of 10k+interest with out cashing it out or hitting any issues with crossing the limit for 2023.
M. Anderson says
As I have stated before, there is NO LIMIT to the dollar amount of gifts that you can deliver in any one year, even to the same person. For example, if you purchased a $10k I-bond for your wife every year for the last decade, you could deliver $100,000 (plus interest) in I-bonds to your wife this year.
However, whatever you deliver will go against that person’s purchase limit for that year. So, if your wife wants to buy her own I-bonds this year, she should purchase her $10,000 in I-bonds BEFORE you deliver the gift. Once you deliver the gift of $10,400, that will eat up whatever remains of her purchase limit.
Toli says
Hi Sam — see comments #128 and #145 above, as well as CFR 363.52 (https://www.law.cornell.edu/cfr/text/31/363.52). In short, the interest doesn’t count towards the limit.
Marc says
To Sam,
The interest doesn’t count towards the $10,000 annual limit so you can feel free to deliver the entire bond to your wife.
To M. Anderson,
I don’t believe what you wrote is correct. According to Harry in this article:
“The principal amount of delivered gifts counts toward the $10,000 annual purchase limit of the recipient in the year of delivery.”
Once you deliver $10,000 of the $100,000 in purchased I Bonds, the limit of the recipient is reached and no more can be delivered that year because it will exceed the $10,000 purchase limit for that year, since a gift delivery counts towards the recipient’s purchase limit.
If I have that wrong, someone else or Harry will correct me.
M. Anderson says
Correction: The interest accumulated on the gifted bond does not reduce the amount that the recipient may purchase. Only the principal. See 31 C.F.R. § 363.52(b).
Sam says
Thanks folks for the replies and links. My Wife and I were able to deliver the gifts in our gift boxes.
Dunmovin says
Anderson/Marc I note the earlier “thread” in January 2022 on the delivery issue. However, I asked, who has delivered from their gift box more $10K (forget interest) to the same person in one year???? Harry, what’s the down side of trying to move $20K purchased last year for the gift box for my spouse…what’s going to happen??
Harry Sit says
We had this discussion last year. See my reply to comment #159 on October 18, 2022 at 4:18 p.m., the reply from M. Anderson to comment #158 at 4:42 p.m., and comment #162 from sscrla at 4:49 p.m. The word “acquire” isn’t defined in the regulations. We don’t know whether it includes receiving gift delivery or not. I’m sympathetic to the reading that it doesn’t but that obviously opens up the situation of buying $100,000 as gifts in one year and delivering $100,000 the next year, or all in the same year for that matter, which laughs in the face of the annual limit.
You can try it and let us know what happens when you deliver the $20K purchased last year. Maybe nothing. You asked what’s the downside of delivering them all now. I ask what’s the upside. The bonds earn the same amount of interest whether delivered or staying in the gift box. I don’t have $100,000 sitting in my gift box. Delivering $10k in principal value each year works just fine for me.
Dunmovin says
And the down side is? Who has delivered more than $10 K from gift box any one year to one person? No one? Therefore the proof is in the pudding …all theory but no practical answer?
M. Anderson says
I did. I had purchased a $10k I-bond three years in a row for a child, and delivered them all to the recipient in a single year when that person turned 18.
Marc says
Well, we have one person who seemes to have done what Harry characterized as having “laughed in the face of the annual limit.” The question is whether it is sanctioned or whether it was overlooked.
Not that Forbes Magazine is the ultimate authority, but they took the conservative interpretation to heart in October 14, 2022:
“As odd as that may seem, it actually presents a fourth strategy for maxing out the current 9.62% rate. Spouses, those with significant others, or perhaps close friends can buy each other a $10,000 I bond as a gift.
If purchased before the new rates take effect, the I bond will earn the annualized 9.62% rate for the first six months. There is one catch, however.
When the I bond is transferred to the recipient’s account, it counts toward the recipient’s annual limit. If they’ve already purchased $10,000 in I bonds this year, you would have to wait until next year to deliver the I bond. Given that it earns the higher return from the start, this shouldn’t present an issue.
In theory, one could purchase more than $10,000 in I bonds as a gift this month for the same person. Just keep in mind that one cannot deliver more than $10,000 a year in I bonds to the recipient, and that assumes they haven’t purchased I bonds on their own”
https://www.forbes.com/sites/robertberger/2022/10/14/how-to-buy-more-than-10000-of-i-bonds-before-the-rate-drops/?sh=2de5738f15de
Harry Sit says
I don’t think buying $10,000 each year and delivering $30,000 in one year laughs in the face of the annual limit, but buying $100,000 in one year and delivering $100,000 the next year or in the same year does. As many people bought more than $10,000 as gifts last year, now the question is whether you taunt the Treasury Department or you show some respect for the limit. If you choose to exceed the $10,000 limit, do it either on the gift buying side or the delivering side but not both. That’s my take.
Marc says
Harry, your take makes sense but it seems like a recent evolution of understanding about the gift delivery process that occurred post-article publication. Does it warrant an article update? Readers are looking for that guidance and may not scroll down through all the comments to get here.
JM says
On the question of delivering more than $10K of I-Bonds to a single person in one year, this is from the TD website:
“What about bonds . . .
for my children?
Each child has their own Social Security Number. Therefore, no matter who buys bonds for the child, the amount of those bonds counts for the child’s limit – not the limit of the buyer.
When you open a linked account in TreasuryDirect for a child under 18, the bonds in the child’s linked account belong to the child. You do not own them. Therefore, they do not count in your limit.
Each child has the same yearly limit: $10,000 for electronic EE bonds; $10,000 for electronic I bonds; $5,000 for paper I bonds.
What about bonds . . .
I give as gifts?
This is just like the situation with your children. The gift belongs to the person to whom you give the bond. Therefore, the amount counts in that person’s limit, not in your limit.
The gift counts for that person’s limit in the year in which they get the bond.
While the gift is sitting in your TreasuryDirect account waiting to be delivered, it is in a special ‘gift box.’ So, even then, it is not yours and does not count in your limit.”
https://www.treasurydirect.gov/savings-bonds/how-much-can-i-spend-own/
M. Anderson says
You read what Harry wrote correctly, but you misunderstood it.
The amount delivered IS applied to the annual purchase limit of the recipient in the year of delivery.
That means precisely what I wrote before. You can deliver as much as you want in one year, but every dollar you deliver uses up any remaining amount that person can purchase for themselves in that year.
And your statement that the interest does not count is incorrect. Every dollar delivered goes towards the RECIPIENT’S PURCHASE LIMIT for that year. If you bought a $5,000 bond and it has accumulated $500 in interest, then the year you deliver it, $5,500 will go towards that person’s purchasing limit. If they haven’t yet bought an I-bond, they’ll be limited to buying $4,500. If they have already bought a $9,000 I-bond, then the $5,500 given to them will use up their remaining $1,000 purchase limit.
M. Anderson says
Correction: The interest accumulated on the gifted bond does not reduce the amount that the recipient may purchase. Only the principal. See 31 C.F.R. § 363.52(b).
olisdad says
so as a follow up to the recent post on delivery of gifts, with a 10k ibond
do you enter 10k in the amount to be delivered box or the total amount with accrued
interest?
Harry Sit says
There’s a radio button for full delivery. You don’t need to enter any amount.
JPirkle says
I’ve read thru the comments pertaining to the gift rules.
In addition to our annual 10k limit purchased last year, also have 20K purchased last year in gift box for spouse. Spouse has 20K purchased last year in gift box for me.
Is it correct that this year we could each purchase our 10k limit first and then gift each other the 20k purchased and not run into the limits and/or upset the treasury folk?
Or is a better strategy to each buy our 10k allotment this year. Each buy another 10k gift for each other. Then next year gift all 30k to each other but do not make an annual purchase? Would this be less offensive….
Thanks. Great information here.
Dunmovin says
My spouse and I have gifted to the other several $10K amounts to each over the years. Nothing this year and no activity on accounts until today. …Testing the TD system my spouse “delivered” to me $5K…it went through and I saw in my TD account…however I noticed the difference in the “with” and “POD” designations/registrations and was going into my account to “attempt” to change the registration to “with” and that triggered the security question request by TD…I guessed wrong and got locked out. After a two hour phone (don’t even try email) hold (one can sure get a lot done on hold ) and everything was straightened out. But then I asked if I could then buy $10K for my TD account and the answer was “yes,” therefore it “seems” that one “could” have more than $10K delivered to the same person in same year!!! Go figure?
Dunmovin says
Has anyone giftbox delivered this year more than $10k to one person? What happened? We know $10k counts against the recipient’s annual limit BUT did the excess “go through?”
Jeff says
New to the forum.
What months would the following purchases interest run:
April 28
July 1
Oct 31
Thank You
Jeff
sscritic says
Let’s look at a calendar.
April 28 is after Nov 1 and before May 1. You will get the Nov 1 rate for the six months of April, May, June, July, August, and September
July 1 is after May 1 and before November 1. You will get the May 1 rate for the six months of July, August, September, October, November, and December.
October 31 is after May 1 and before November 1. You will get the May 1 rate for the six months of October, November, December, January, February, and March.
Jeff Knecht says
Thank you very much! I was not certain if the April 28th purchase was just good for the month of April and if it would then reset then for the 6-month period November 1 – April 3
I have read and tried to understand the comments regarding Gift purchase and delivery and annual limits and it is still a little gray to me.
For example, can three, $10K gifts be purchased and, at some point, deliver the gifts to my spouse in the same year?
It seems that would exceed her $10K annual limit, even if, she didn’t purchase her own I Bond.
During a segment of the Diamond Nest Egg blog, the hostess stated that, for example, she could purchase five, $10K I Bond Gifts and deliver them to her husband. I listened to it 3 times, but yet, maybe didn’t understand it correctly.
And, since it is her spouse, she would not have to fill out form 709, for gifts exceeding $16,000.
However, while reading the lengthy post on your forum. I thought that a similar example had been discussed and confirmed somewhat.
I really enjoy the Boglehead Forum and look forward to learning more. I followed Bob Brinker for many years as a kid, and he always spoke highly of John Bogle.
My experience with Treasury Direct got off to a rocky start. On April 28, 2022, I opened up a TD account for my wife and everything worked out after a short learning curve experience. When I tried to open an account for myself, using basically the same information, I got locked out and had to send in the dreaded 5444 form and was not able to get back into my account until July 1, 2022.
Thank you for your help.
Jeff
Mandy D says
We bought Gifts for each other in Oct 2022. If I do not buy anything in 2023 do I have to wait until Oct 2023 to transfer the Gift or could I do it in Jan 2023? In other words are all transfers such as Trust or Gift per calendar year or is it based on the date we bought it?
JFlanders says
It is by calendar year. You could have bought the end of December 2022 and then again first week of January 2023.
Redemption and interest rules i.e. 1 yr 5yr etc is by the purchased month.
Jeff Knecht says
Thank you for the clarification on Gift Delivery.
I’m quite certain that you could “Deliver” the gift to your husband on Jan 1, 2023. That would satisfy his $10K limit for 2023. You could then buy up to $10K in IBonds for yourself beginning on Jan 1, 2023, and that would satisfy your $10K maximum limit for 2023..
You could then buy $10K Gifts for each other in 2023 without exceeding yours or your husbands
$10K maximum limit for 2023.
Mandy D says
Thank you for clarifying that buying is by calendar year. Redemption is by purchase month. But since Transfers to main account is not a new purchases nor is it redemption then is it by calendar year or by purchase month?
JFlanders says
Giftbox, purchases and whatever other method is all by calendar year. Limit resets Jan 1st.
Jeff Knecht says
JFkanders. *Sorry, I thought that was a question for me and I should not have given you my thoughts.
sscritic says
Mandy said “we.” “You” not buying anything in 2023, is irrelevant to your transfer*, but if “the other” buys a bond in 2023, then that will impact the amount of any transfer to that person. For example, if the other person buys a $2000 bond and you transfer $5000 to them, the total of $7000 in 2023 is under the $10,000 limit.
*If you do not buy anything in 2023, you can receive up to $10,000 combined in transfers from your parents, children, and other.
Alan says
I bought an i bond as a gift for my father on September 1st. I put it in my gift basket but never delivered it. He passed away October 6th. I listed myself as the POD for the bond. I dont know if my father had a treasury direct account and if he did I dont know the account number. How do I redeem the bonds as I am the beneficiary and when I redeem them will that count against my $10,000 limit?
Harry Sit says
Write a letter to TreasuryDirect to explain the situation and request moving the bond out of your gift box into your account. Attach a copy of the death certificate. Inheriting a bond doesn’t count against your limit.
asdatada says
Hi Harry,
I revert to your columns every time i need to confirm I bonds both directly, gifts or via tax returns. Thank you for writing these very helpful notes and corresponding to questions. I had purchased for my spouse and vice versa gift I bonds last year given the even higher rate then, which we have not yet delivered.
In your notes above, you state that in a year that the rates are good, you would deliver the gift and buy another gift and in a year with lower interest you would just deliver the gift bonds. With the current dropping rates i have mixed thoughts about buying any new I bonds vs buying the widely traded competitive treasuries. I have been contemplating between not buying any I bonds to buying a gift for half (5k) now in April and seeing what the fixed rates would be in May to buy more later. Does it matter when in this year I take delivery of the previous years 10k gift bonds? I presume you take delivery first and then buy new gifts just for convenience and not because of any ramifications of switching the order?
Also (provided u feel ok to say so; otherwise ignore this part of the question) have you (for yourself/family) bought/gifted 5 or 10K before end april given the current rates? thanks
Harry Sit says
It doesn’t matter when you deliver the gift. I’m not buying more I Bonds because I already have enough for the short term. I plan to cash out some starting on August 1 to invest for the long term in TIPS. See When to Stop Buying I Bonds or Cash Out and Buy TIPS.
asdatada says
Thanks for the reply Harry and about not buying any more I bonds on your end this year. Yes i took a look at the other write up. Thank you. That is interesting. I have to read more on TIPS as it is a little more complex than I bonds but I have been following the rates. The TIPS rates have come down as have the treasuries since the SVB issue.
Sam says
My wife and I bought ibonds as gifts (10k each) on 05/01/2022 and delivered the gift to each other on 01/02/2023. When I go to our holdings in the treasury site, this particular delivered gift is currently earning 3.38% while our other purchased iBonds (not executed via gifts/delivered gifts)from 2021, 2022 are earning 6.48%. Can someone help me understand why the gift purchase and gift delivered approach for that particular batch is earning a lower interest rate of 3.38%.
Dunmovin says
Take a look at eworkpaper.com which gives current value and value if one cancels with 3 month penalty
Dan A says
I suppose it’s all a matter of the 6-month interval timing. All of my 2021 & 2022 bonds are at 6.48%, but next month, several of them go to 3.38%, in July – several more. The delivery date shouldn’t matter.
Dan A says
Bonds bought in May start their cycle with the newest rate, whereas if you’d bought them earlier that year, they wouldn’t start at the new rate until they had earned the previous rate for 6 months. That is why your May bonds were first to hit the 3.38% rate.
M. Anderson says
Please refer to this chart:
https://www.treasurydirect.gov/files/savings-bonds/i-bond-rate-chart.pdf
Sam says
Appreciate the replies and suggestions. Thanks
Dunmovin says
This is my second attempt to …
We’ve seen several posts on whether or not ibond purchase for nonspouses is a gift of present/future interest and when/if a gift tax return is required. Looking at IRS Form 709 under General Instructions at Joint Tenancy one sees, “If you buy a U.S. savings bond registered as payable to yourself or a donee, there is a gift to the donee when the donee cashes the bond without any obligation to account to you.” Ergo, that could be the answer to that ultimate Q. I could not locate any discussion of present/future interest in that context.
Sooo, buy multiple gift box ibonds for each donee if on death bed? How can one create “any obligation to account to you” (condition subsequent) to further extend the trigger time post-death?
What says you?
Harry?
Harry Sit says
Sorry I don’t understand what you’re asking. I probably don’t know the answer either. If I buy I Bonds as a gift for a non-spouse recipient, I keep it simple. I would buy them within the annual exclusion limit and deliver the bonds right away. They’ll have the bonds and take it from there. Nothing is ambiguous that way. If I’m dying, I won’t waste my precious last moments on buying I Bonds.