I’ve been buying I Bonds for 20 years. I only realized now I’ve been writing as if everyone already knew what they were and how they worked. If you buy I Bonds before November 1, 2023, you will get a 0.9% fixed rate plus a variable rate that continues to match inflation in the previous six months. If you’re new to I Bonds, this post walks you through from soup to nuts.
What Are I Bonds?
I Bonds are short for Series I Savings Bonds. They are bonds issued by the U.S. government directly to retail investors. Currently, I Bonds carry a favorable yield over other CDs and bonds. This makes I Bonds the best low-risk investment at the moment.
How I Bonds Work
Think of I Bonds as flexible-term variable-rate CDs.
You’re required to hold them for at least one year. After that, you can cash out at any time you’d like before the maturity date, or you can choose to hold them for up to 30 years from the original time of purchase. If you cash out within five years, you forfeit interest earned in the previous three months, whereas the early withdrawal penalty on a typical commercial CD is often six months or 12 months of interest. The flexibility to cash out after one year with a low early withdrawal penalty or to hang on for as long as 30 years makes I Bonds good for both short-term and long-term investing.
Similar to a CD, the value of I Bonds never goes down. They are guaranteed by the full faith and credit of the U.S. government. Unlike a typical CD with a fixed interest rate for the entire term, the interest rate on your I Bonds changes in six-month cycles. You stay on the current rate for the full six months and then you go on a new rate for another six months, and a new rate after that for another six months, and so on.
The interest rate is guaranteed to at least match inflation. If the inflation rate goes up, the interest rate on your I Bonds automatically goes up. Some older I Bonds earn a positive rate above inflation. The I Bonds you buy now only match inflation. Even merely matching inflation makes I Bonds attractive when other CDs and bonds don’t keep up with inflation.
Tax Treatment
The interest on I Bonds is credited monthly and automatically reinvested every six months. You get all the accumulated interest when you cash out. You don’t get a separate payout monthly or quarterly.
By default, you pay federal income tax on the interest from I Bonds only when you cash out, whereas you must pay taxes on the interest from CDs and bond funds every year even if you reinvest the interest. The interest from I Bonds is exempt from state and local income taxes. I Bonds are more appealing than other CDs and bonds because you have the tax deferral and the exemption from state and local income taxes.
You can choose to pay tax in a different way but it gets complicated. Staying with the default makes it easy for everyone. See Taxes on I Bonds Get Complicated If You Go Against the Default.
If you meet an income limit and other requirements, it’s possible to cash out your I Bonds tax-free when you use the money for qualified higher education expenses. See Cash Out I Bonds Tax Free For College Expenses Or 529 Plan.
Where to Buy I Bonds
There are only two ways to buy I Bonds:
1. Buy electronic bonds online at the government website TreasuryDirect.
2. Buy paper bonds with money from your tax refund when you file your tax return with the IRS each year. See details in Overpay Your Taxes to Buy I Bonds.
You can only use regular after-tax money to buy I Bonds. They’re not available in any tax-advantaged accounts such as 401k-type plans, IRAs, or HSAs. Nor are they available through any brokerage firms such as Fidelity, Charles Schwab, or Vanguard.
Purchase Limit
I Bonds are such a great deal that the government puts a limit on how much you can buy each year. At current rates, you should get your full quota before you buy any other CDs or bond funds.
When you buy on the government website TreasuryDirect.gov, the limit is $10,000 each calendar year per Social Security Number as the primary owner in a personal account. When you buy using money from your tax refund, the limit is $5,000 per tax return (not per person when you file jointly).
If you have a trust, you’re allowed to buy another $10,000 each calendar year in a trust account. See Buy More I Bonds in a Revocable Living Trust.
If you have a business, the business can also buy $10,000 each calendar year. See Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp.
If you have kids under 18, you can also buy $10,000 each calendar year in each of your kids’ names. See Buy I Bonds in Your Kid’s Name.
If you’d like to buy I Bonds as gifts to others, see Buy I Bonds as a Gift.
A married couple each with a trust and a self-employment business can buy up to $65,000 each calendar year, and more if they file separate tax returns, buy in their kids’ names, or buy as gifts for family members.
- $10,000 in Person A’s personal account with Person B as the second owner
- $10,000 in Person B’s personal account with Person A as the second owner
- $10,000 in an account for Person A’s trust
- $10,000 in an account for Person B’s trust
- $10,000 in an account for Person A’s business
- $10,000 in an account for Person B’s business
- $5,000 using money from their tax refund if they file jointly (or $5,000 each if they file separately after making sure they won’t lose other tax benefits)
- $10,000 in the name of each of their kids under 18
- $10,000 as a gift for each member of the extended family
We had only one trust before. We created a second trust with software to buy another $10,000. For buying I Bonds in a trust account in general, please read Buy More I Bonds in a Revocable Living Trust.
Open Account
If you never bought I Bonds before, you need to open an account at the government website treasurydirect.gov. You can buy more in the same account in subsequent years. Find the Open Account link at the top right.
Choose the first option for Individual/Personal. Go here for a trust account or a business account as well.
Now you can choose an individual, business, or trust account.
Next, fill out the required information and choose a security image, a password (not case sensitive), and security questions. Important: Save your answers to the security questions. You will be asked to answer one of the security questions when you perform certain actions at a later time. Your account will be locked if you can’t answer the security questions.
Separate Account for Spouse
TreasuryDirect doesn’t support joint accounts. The individual account you’re opening now is only for yourself. If your spouse also wants to buy I Bonds, he or she must open a separate account. However, you can specify a second owner or beneficiary on the bonds you buy in your personal account. You do that at the holdings level at the time of each purchase. We’ll cover that in the Registration section of this post.
If you’re opening a trust account, see Buy More I Bonds at TreasuryDirect in a Revocable Living Trust for what to use as the name of your account.
Link a “Forever” Bank Account
The application also asks you to link a bank account. Important: Please choose a bank account you will keep using forever. Linking a bank account at the time of account application is super easy, but changing the bank account in the future will require paperwork and a long wait. Also, make sure you enter the bank routing number and account number correctly. They don’t send any random deposits to verify the bank account. If you enter a wrong number now, it may be difficult to change it.
Save Account Number
You will receive your TreasuryDirect account number by email. Important: save your account number. You’ll need it to log in.
Most people can start buying right away after receiving the account number. A small percentage of people need to complete an extra step for identity verification. If you’re among the unlucky few, please read Where to Get a Signature Guarantee for I Bonds at TreasuryDirect.
Schedule Purchase
Log in with the account number. The system will email you a one-time password (OTP). Important: Don’t use the back and forward buttons in the browser when you use the TreasuryDirect.gov website. Only use the “submit” and “return” buttons on the web pages.
After you log in, go to BuyDirect in the menu.
Although we use TreasuryDirect only to buy I Bonds, the account can be used for other products as well. Choose Series I near the bottom of the list.
Registration
If you’re buying I Bonds for the first time in a personal account, you need to create a Registration, which means whether you want the bonds to have:
- Just yourself as the only owner; or
- You as the primary owner and another person as the second owner; or
- You as the owner and another person as the beneficiary.
Choose the “Sole Owner” radio button if you want yourself as the only owner with neither a second owner nor a beneficiary. Choose “Primary Owner” if you want yourself as the primary owner with another person as the second owner. Choose “Beneficiary” if you want yourself as the primary owner with another person as the beneficiary. See I Bonds Beneficiary versus Second Owner for the difference between a second owner and a beneficiary.
Unlike in typical commercial accounts, the second owner and the beneficiary in TreasuryDirect are at the holdings level, not at the account level for all holdings. You can have some bonds with Person A as the second owner, some other bonds with Person B as the beneficiary, and so on.
No Contingent Beneficiary
Each bond can have only one second owner or one beneficiary but not both at the same time. You can’t specify a contingent beneficiary. The second owner or beneficiary also has to be a person. It can’t be a trust or a charity. Trust accounts and business accounts can’t buy bonds with a second owner or a beneficiary. The trust or the business will be the only owner.
A married couple can choose to:
(a) Name each other as the second owner or beneficiary and live with the risk of simultaneous death; or
(b) Name someone such as a child or grandchild who isn’t likely to die simultaneously. The child or grandchild will get an early inheritance when you die. The surviving spouse will live on other assets.
First- and Second-Named Registrants
If you decide to have a second owner or a beneficiary, enter yourself as the “first-named registrant.” Enter the second owner or the beneficiary as the “second-named registrant.”
Purchase Date
Choose the purchase date. Make sure you have money available in the linked bank account. They send out the debit the night before your scheduled purchase date. The debit will hit your bank account on the scheduled date first thing in the morning. They may lock your TreasuryDirect account if the debit bounces. It’ll be difficult to unlock it.
Important: Don’t cut it too close to the end of the month, or else you may miss a month worth of interest. It takes one business day to issue the bonds and possibly more days if there’s a delay. If you buy close to the end of the month, your issue date may be in the following month and you won’t get the interest for the previous month. I schedule my purchases to a date at least a week before the end of the month.
Grant Rights to the Second Owner or Beneficiary
If you put a second owner or a beneficiary on your I Bonds, the second owner or the beneficiary doesn’t automatically see those bonds in their account. They see the bonds only when you grant them View or Transact right. The beneficiary can only be granted the right to view the bonds (“read-only”). The second owner can be granted either View or Transact right.
After the purchase completes and you see the bonds in your account, please read How To Grant Transact or View Right on I Bonds for a walkthrough on how to grant rights on the bonds you just purchased and how a second owner can transact on the bonds on your behalf after you grant the right.
Rinse and Repeat
If you’re buying additional I Bonds in the name of a spouse or a trust, repeat the steps above by opening a separate account, creating a password, linking a bank account, saving the account number, and scheduling the purchase. The different accounts can use the same email address and link to the same bank account if you’d like. Because you’ll use different account numbers to log in, you should keep notes of which account number is for which owner.
If you’re interested in buying I Bonds in the name of your trust, kid, business, or as gifts, please read:
- Buy More I Bonds in a Revocable Living Trust
- Buy I Bonds in Your Kid’s Name: You Can, But Should You?
- Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp
- Buy I Bonds as a Gift: What Works and What Doesn’t
Check Balance
TreasuryDirect doesn’t send any account statements. You check your balance on the website. Your total face value is displayed on the home page after you log in. This doesn’t include any credited interest.
Clicking on the Savings Bonds link will show you a breakdown by savings bond type: Series EE and Series I.
The Amount column shows the total face value. The Current Value shows the total face value plus credited interest. Click on the radio button next to Series I Savings Bond and then click on Submit. You’ll see a list broken down by the Issue Date.
Three-Month Lag in Current Value
If your bonds are still within five years from the Issue Date, the Current Value automatically excludes interest earned in the last three months. If you cash out today, you’ll receive the Current Value. That’s why you won’t see any interest in the current value during the first four months. You will start seeing a higher value in the fifth month.
Interest Rate Lag
The interest rate on your bonds doesn’t necessarily change right away when a new interest rate is announced. Each bond stays on the previous rate for the full six months before it moves on to the next rate for another six months. The rates change in different months depending on when your bonds were originally issued.
Don’t worry when you see your older bonds earning a different interest rate than the current interest rate on your newer bonds. When those older bonds “age out” the previous rate for the full six months, they will move on to the newer rate for six months. All bonds eventually go through all rate cycles.
Cash Out (Redeem)
Because I Bonds are better than other bonds and there’s a purchase limit, you should hang on to your I Bonds as much as you can until you have better choices. If you need to cash out some of them (called “redeem” in the government lingo), you use the ManageDirect menu.
The option isn’t really obvious unless you know what to look for. Click on “Redeem securities” under the heading “Manage My Securities.”
Choose “Series I Savings Bond.”
Choose the bond you’d like to cash out from.
You don’t have to cash out/redeem the full amount. Redeeming only part of it is just fine. The minimum cashout amount is $25. If you originally purchased $10,000 and it grew to $10,708, when you redeem $3,000 from it, they will prorate the $3,000 into $2,801.64 principal and $198.36 interest. You’ll pay tax on the interest.
The money will be sent to your linked bank or credit union account by direct deposit in one or two business days after you cash out.
Tax Forms
If you don’t cash out (redeem) any I Bonds in any year, you won’t get a 1099 form for the interest earned. You pay taxes only in the year you cash out.
If you do cash out (redeem) any I Bonds in any year, TreasuryDirect will generate a 1099 tax form for the interest portion. They don’t send paper tax forms. You’ll come back to the ManageDirect part of the website at tax time to get the tax form (see the screenshot above).
You can choose a different treatment for when you pay taxes but it gets complicated. Please read Taxes on I Bonds Get Complicated If You Go Against the Default if you’re interested.
Customer Service
If still have questions or if you run into any problems, you can contact TreasuryDirect:
- Send an inquiry via their contact form.
- Send an email to Treasury.Direct AT fiscal.treasury.gov.
- Call 844-284-2676 during business hours.
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KD says
Very helpful. Thank you!
CP says
If one has a sole proprietorship with separate TIN and checking account, can one buy $10k of Ibonds using the exact same name (no dba, etc) as using for that individual to buy $10k(using in the latter case that individual’s Soc sec no. and different checking acct (total being $20k)? If so, ibonds would be issued in same name AND who can be a joint owner of proprietorship ibonds…spouse? No requirement of gross income for business? If it all works, then the difference is merely Soc sec no. verses TIN
Harry Sit says
The sole proprietorship account and the personal account are of two different account types. Having the same name is just a coincidence. A sole proprietorship account can’t have a second owner or a beneficiary.
always_gone says
TreasuryDirect says a minor can own them with a linked account from the parent. Can I assume that if we buy some with our kids SSN’s, it would end up being like a UTMA or could we redeem them for any reason?
Harry Sit says
From TreasuryDirect: “Minor Account: This is a custodial account that a parent, natural guardian, or person providing chief support establishes for a child under the age of 18.” I’m not a lawyer. I would treat it as a UTMA account.
Andie says
But if the parent is the second owner, then wouldn’t you be able to redeem for any reason?
Mia says
Yes, you can redeem it for any reason. According to treasurydirect.gov–“You may purchase, redeem, receive gift deliveries, and perform other transactions within the account on behalf of the minor. ” https://www.treasurydirect.gov/indiv/help/TDHelp/help_ug_126-LinkedAccountLearnMore.htm
Waldemar Traczyk says
Thank you.
Eric says
Really helpful info on the I Bonds purchase in the last two posts. For your future post, it will be great if you could share the step-by-step instructions on creating a simple new Revocable Living Trust with software to buy another $10,000 I Bonds in TD.
Catter says
The Suze Orman kit does exactly this. It’s about $65? And sharable with friends and family.
Matt says
Do you have to repeat this account opening process and create separate accounts every year? Or once you open the account, for subsequent years, can you just buy more I-bonds into the same account?
Harry Sit says
You can buy more in the same account in subsequent years.
Walt says
When you receive the current interest rate, is that good for 6 months, or does the rate you receive change on October 1st?
Harry Sit says
You stay on the current rate for the full six months and then you go on a new rate for another six months, and the new rate after that for another six months, and so on.
Greg W says
And it gets even better – subject to AGI phase outs, when redeemed ibonds can be used for qualifying educational purposes, which includes a 529 account, tax free!
Harry Sit says
Good point, Greg. If you intend to use the money for qualifying educational purposes, it’s probably better to contribute to a 529 plan directly. You aren’t subject to AGI limits in a 529 plan and you can invest in stocks there for long-term growth. If you can stay under the AGI limit, I Bonds are good for the fixed income portion of a college fund. A topic for another day!
Michael Jones says
Do make sure you use a good account the first time. I used a savings account from my credit union, who last year decided to start cracking down on using a savings account as a ‘transaction account’. So they denied my ACH transfer request.
Treasury Direct will only let you modify account information through an old-fashioned paper form that REQUIRES a signature validation from your financial institution. Can’t be notarized, etc. There is a list of people/ways that can validate, but it’s super annoying.
So, in sum, pick an account you intend to keep for some time and make sure your financial institution won’t squash your transfer request.
Robin Coe says
I have $95,000 in Series EE bonds that all mature in 2022. I don’t need the money and CD rates are so low I don’t have any idea what to do with the money. I do have mutual funds, but this is part of my “safe portfolio” . Might you have any suggestions?
Harry Sit says
Consider buying I Bonds as outlined here if you can commit to holding at least a year.
Brad says
You likely already know this, but be sure that “mature” really means they don’t earn interest any longer. EE bonds can earn interest for many years beyond “maturity” which is usually defined as five years after purchase. EE bonds earn interest for 30 years, even though they mature after five. However, if these are very low interest rate bonds, it may very well be worth cashing them in before 30 years, for all the proceeds that you can convert to I-bonds for instance (which right now are earning 7.12% for the next six months, but be warned that the I-bond rate fluctuates based on inflation/CPI, whereas your EE bonds’ interest rates do not fluctuate).
And of course, like I say you may know all this already and if you bought your EE bonds in 1992, congratulations on earning all that interest and I’m guessing the 1992 interest rate you are earning until they stop earning interest in 2022 is a much higher rate than you can get now!! (I think EEs are paying 0.10% now.)
John Endicott says
Brad, be careful with your terminology.
5 years is not maturity for any EE bond ever. The shortest maturity date ever for an EE bond was 8 years for EE Bonds issued in 1981 and 1982. What 5 years is the amount of time you have to hold the bonds to avoid being subject to losing 3 months of interest for early withdraw.
Maturity (also known as original maturity) has a specific meaning for EE bonds. It’s when the bonds are guaranteed to double in value. For current EE bonds (those issued since May 2005) that happens at 20 years.
Then there’s the final maturity, which for EE bonds means when the bonds stop earning interest, is at 30 years.
you can find more information at treasury direct
https://www.treasurydirect.gov/indiv/research/indepth/ebonds/res_e_bonds_eeratesandterms.htm
Coriander says
Thanks, very helpful! I see that Treasury Direct allows the purchase of I-bonds as a gift for another person. If I’ve already bought my $10,000 limit for the year, can someone else give me more as a gift? Or am I limited to $10,000/year no matter who buys them?
Harry Sit says
A gift counts toward the recipient’s quota.
NRS says
I have an account for my LLC and I want a personal account for emergency savings. Can I create a custom linked account or do I need a completely separate account?
Harry Sit says
I would create a completely separate account. One of the rules of running a business is to keep personal matters and business matters separate.
Walt says
TreasuryDirect lists 1.77% as the semi-annual inflation rate. They then multiply that by 2 to get 3.54%. Is that not just a projection for the next 6 months? How does that work for an individual account to earn 3.54% for 6 months? All I see is 1.77% listed.
Thank you.
Harry Sit says
3.54% is the annualized rate. If a bank offers a 6-month CD that pays 3.54% annualized rate, for each $10,000 you deposit into this CD, you will receive $177 in interest when the CD matures in six months. It’s different than a 12-month CD that pays 1.77% annualized rate where you receive the $177 interest after you tie up $10,000 for 12 months.
The Crusher says
This article was so very helpful! Thank you!!
I have one question for clarification that I would love your insight on. If I want to buy $10K of I-Series Bonds for both myself and my wife, do I need to create two accounts or can I use one account and set up two registrations with one each as a primary owner (and the respective partner as beneficiary)?
Can you help answer this question? THANKS!
Harry Sit says
Two accounts. Set spouse as the second owner or beneficiary and grant transact or view rights.
The Crusher says
Thank you! Super helpful post!!
Cheryl Stewart says
Great post. Under your heading “Where to Buy I Bonds”, you are very clear that “You can only use regular after-tax money to buy I Bonds. They are not available in any tax-advantaged accounts such as 401k-type plans, IRAs, or HSAs.” However, since LLCs may purchase iBonds, is it possible to purchase iBonds from a SDIRA LLC checking account? The SDIRA LLC would own the iBond. The LLC has its own EIN and its operating agreement allows bond purchases.
Harry Sit says
TreasuryDirect won’t treat your SDIRA LLC differently than any other LLC. When the LLC cashes out the bonds, they will issue a 1099-INT (and report to the IRS) for the taxable interest. I don’t know what you do with the 1099.
JW says
Great post. You say interest rates could go up to 7%. Does this mean you’d wait until November if you hadn’t invested in I bonds yet this year?
Harry Sit says
No. Every rate lasts six months. If you buy now, you’ll still get the ~7% rate in the second cycle.
Mike says
Thanks I just finished purchasing I-bonds using your instructions. So helpful! When setting up my account they originally put a hold on my account and I had to get a signature guarantee from my bank. That was a minor inconvenience. Will look into setting up a trust later in the year to buy more I-bonds so that article will come in handy soon. Thanks for sharing with us! I refer your article to several family members that are interested in I-bonds.
Harry Sit says
Nice! I don’t know what triggers requiring a signature guarantee. They don’t require it from everyone. It’s great to hear you overcame that extra step easily.
robert just says
I would appreciate any advice or information on what people have done recently when selecting a term for I bonds. Is there any information on how the base rate changes with inflation, Federal debt etc.?
Harry Sit says
If you meant predicting when the fixed rate will go up from zero (matching inflation), don’t hold your breath. I say it won’t go up until the 5-year TIPS yield turns positive. I don’t think the I Bonds fixed rate was ever positive when the 5-year TIPS yield was negative. The 5-year TIPS yield is currently -1.6%. It has a long way to go.
https://fred.stlouisfed.org/series/DFII5
Kevin says
Is there a good calculator or website to determine the value of a $10,000 I-Bond at any given time (realizing that you can only determine the value through the time-frame for which rates have been announced)? (Is current value available within your account on the Treasury Direct website? I don’t remember seeing it.)
Thanks for a fantastic blog and article, Harry!
Harry Sit says
The current value is displayed within the account (less three months of interest if the bond is still within five years). See screenshots under the “Check Balance” heading. This online calculator says it’s for paper bonds only but it works just as well for electronic bonds.
https://www.treasurydirect.gov/BC/SBCPrice
Kevin says
Thanks, Harry. I found the screenshots in your article above. Thanks!
I earlier tried to use the paper I-Bond calculator but don’t know what to enter for “Bond Serial Number”. My bond is electronic and I don’t see a serial number in any of my screenshots.
Harry Sit says
You can use any letters and numbers as the serial number in that calculator.
John Endicott says
Try this again (as the first time it didn’t post in the right place)
You don’t have to enter any value in the serial number field if you don’t want to. it’s optional and purely there for informational purposes and does not affect the value calculations
RT says
Just enter month, year, and amount and it will tell you how much it is worth:
http://eyebonds.info/ibonds/home10000.html
Chris says
https://eyebonds.info/ibonds/index.html
M says
Others have already pointed out eyebonds, which is a good resource.
Another to check out is https://www.yourtreasurydirect.com/ which has nice modern dashboard.
Alex says
I have a question about a self-employment business. If I don’t have LLC and just sell stuff on ebay (not a lot of profit) do I still can buy additional I-bonds as “business”?
R says
A recent experience from a colleague was not an shining moment for Treasury. Even with a TIN, sole proprietorship, and many years filing schedule C, etc and not having a dba was the first of many hang ups. Then no beneficiaries. No properly promulgated rules. Have fun and patience…and you too shall succeed
The Crusher says
Thanks again! This information is so helpful!
I opened my account with your help. What points will I see the account value grow? I ask because I opened my account in early September and yet when I checked in October the value sits at $10K. Thanks!!!!
Harry Sit says
In the fourth month. It’s mentioned in the paragraphs under Check Balance.
The Crusher says
Thanks again! Sure helpful!!
Mark says
I’m interested in maxing out our opportunities for buying iBonds for my wife and I. We’ve already bought them in each of our names and in the name of our Joint Trust and we plan to buy some with our next tax refund.
We both also have sole proprietorships and I’m curious as to the long-term implications of buying iBonds in the name of a business. What happens to the business iBonds if one or both of our businesses ceases to operate or gets sold down the road? Would we just need to redeem them at that point or would there be some opportunity to transfer them to the business owner’s personal Treasury account?
R says
It isn’t easy dealing with Treasury on sole proprietorships…read all the other posts above. I have a unique checking account linked to sole proprietorship ibond account and any change requires paper submission as does a so-called bank “guarantee “ (it really isn’t one, just a bank stamp) for verification of who you are. At the end of the day look at their forms 5512 and 5336…they were the ones of interest to me…perhaps to you. I suspect Treasury has many more forms. Expect an unnoticed hold to be placed on account. When I get to a live person they are most helpful.
Mark says
It sounds like if I closed my sole proprietorship down in the future, I’d have to transfer the bonds to my personal name, which would count toward my personal limit for that year. Is that correct? Or could I just leave the bonds in the name of that business indefinitely until I’m ready to redeem them?
Todd says
If you buy ibonds in November, can you then buy another 10,000 in January, or do you have to wait an entire year? Thanks!
Harry Sit says
Todd – The quota resets on January 1. See comment #26.
Jonathan says
Great information, thanks so much. I have a question on frequency of buying $10,000 of I-bonds. If I purchase $10,000 in October 2021, can I purchase another $10,000 in January 2022 (the beginning of a calendar year), or do I need to wait 12 months to purchase another $10,000? Thanks!
Harry Sit says
Calendar year. The quota resets on January 1.
Jeanne says
Great article! I have a question … if wanting a beneficiary, I see that you enter it into the second-named registrant, but what distinguishes it from being the second owner?
Thank you!
Harry Sit says
The radio button above the first-named registrant. Sole Owner means neither second owner nor beneficiary. Primary Owner means the second-named registrant is a second owner. Beneficiary means the second-named registrant is a beneficiary.
Chris says
Great article…..thanks!!
When buying bonds and listing a second owner, does that purchase reduce the amount the second owner can purchase in I bonds for themselves for that calendar year? Basically, is the $10,000 limit affected for the second owner?
Is it better to list a spouse as secondary owner versus beneficiary so the bonds can be cashed in easier upon death of the primary owner?
Harry Sit says
The purchase limit only counts toward the primary owner. The second owner is like a beneficiary plus a power of attorney. It’s the same after death.
Derek b says
Re: “The interest on I Bonds is credited monthly and automatically reinvested”
Its probably more accurate to say interest is earned monthly and compounded (credited) semiannually.
Mike says
If I am a first time purchaser of I-Bonds and want to max out for 2021 and 2022, is the best investment plan to invest $10,000 in October and $10,000 in January?
Harry Sit says
It is if you have the money in October and January. If not, buying $10,000 in November or December 2021 and again in February, March, or April 2022 works as well.
R says
One is normally looking at the delta in availability of rates …going from to. With that said I suggest toward end of a month purchase . I’m looking at march next year for tax refund purchase as well as $10k purchases in late February (CD maturity then) and to see what changes in competing long term CD rates are at that time. Thou I don’t expect anything higher than available 7.1% and I don’t buy ibonds for long term.
Mike says
My parents purchased I-bonds online in individual name only. Can they change this to add the spouse? Husband (primary owner) with Wife (secondary owner)?
Harry Sit says
The primary owner can add or remove a second owner or beneficiary online at any time. Look for “Edit a registration” under the ManageDirect menu. Select the bonds to change and go from there.
Paul says
Can I use the same email account for opening a trust and a personal account? Do they need to be separate registrations?
Coriander says
I used the same email address and bank account for both my personal and trust I-bond purchases. It was no problem.
Keith K says
Does it make any difference purchasing end of October rather than end of November (when anticipated higher rate resets for a new 6 month cycle)? Thanks
Harry Sit says
It doesn’t matter when you invest for the long term. Buy whenever you have the money. Because rates go in six-month cycles, buying in October will also catch up to the 7.12% rate and the new rates after that eventually. It’s only a matter of time. Your purchase in early 2022 will get the 7.12% rate and the new rates after that. Your purchase in 2023 will get whatever new rates in effect at that time. It makes little difference what rate you start with for six months on one of your many purchases to come.
Ben says
Yes but if I’m investing only for the short term (12-15 months) it makes a difference which 6 month rate you get.
John Endicott says
For short termers, you want to buy at the end of the month and it would be best to buy at the end of Apr or end of Oct rather than in May or Nov because then when your 6 months of one rate is up, the information needed for the next 6 month rate will be available which makes decision making on holding vs redeem easier.
R says
Purchase in October is for the then/current rate for six months from October 1st (3.54) and then on April 1st those ibonds will have a rate change to the anticipated November 1st rate of 7.1apy which goes to October 1st 2022…you won’t get 3.54 rate if you wait to November 1st and you will know the rate for only 6 months not 12
Ralph says
Jan 1 next year is on a Saturday. So Jan 3 is Monday, the first banking day. If I schedule my 2022 purchase for Jan 3, will I earn interest for January, or will it start earning 2/1?
Harry Sit says
Ralph – A bond issued on any date in a month earns the full month’s interest for that month. Whether you buy on the 3rd, 13th, or 23rd of January, you’ll earn the full interest in January.
James Bolan says
I opened an account. How long should I wait to purchase bonds make sure my account is linked?
Harry Sit says
It’s unnecessary to wait. Buy whenever you have the money in the linked account ready to go.
Jim says
I’m having a lot of difficulty understanding how the interest rates are figured. Is there info someplace that explains it to dummies?
Harry Sit says
You can go into the weeds with changes in the CPI numbers (March-to-September and September-to-March) or just know the rates will track inflation over time with a delay. The delay doesn’t matter when you keep buying every year and invest for the long term.
mangorunner says
Here is a detailed explanation of the interest rate calculation, straight from TreasuryDirect:
“How does Treasury figure the I bond interest rate?”
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#rate
Ralph says
You stated “Important: Don’t cut it too close to the end of the month, or else you may miss a month worth of interest.”
Can you elaborate on this statement, if I want to make the purchase effective on 11/1 to get the new rate of 7.1%.
R says
Read prior posts and in particular 34 and 35
Ralph says
35 does not make sense.
mangorunner says
Read this:
“I-Bond dilemma: Buy in October? Or wait until November?”
https://tipswatch.com/2021/10/14/i-bond-dilemma-buy-in-october-or-wait-until-november/
R says
Sorry, Ralph #37…didn’t (and still don’t) sense that the technical aspects are fully appreciated. A literal answer to your post for a November 1 (in order to get new rate) effectiveness…. is purchase anytime from that date until a few days before end of April 2022 will lock in the November 1st rate.
John Endicott says
#37, the entire interest for a month is earned regardless of what day in the month you purchased. So it’s best to buy at the end of the month as it’s like getting a months interest free. IE if my purchase date was 11/1 or 11/30 I get the same amount of interest for the month of November – so by waiting until the end of the month to purchase, my money can be elsewhere for nearly a full month earning interest (in a bank account) or making capital gains and/or dividends (if invested in the stock market) or even just sitting in on a shelf gathering dust.
The problem in waiting too close to the end of the month is that the purchase might not finalize before the month ends, in which case your purchase date would be in the beginning of the next month (IE December) meaning you missed out on Novembers interest.
Ben says
Great Post!
Do you know if the interest accrued counts towards the investment threshold for the Earned Income Tax Credit(EITC) every year? Or is it only when you cash them out
Harry Sit says
It counts only when you cash out.
Ben says
Thanks!
Do you recommend buying in October to lock in 3.52% +7.12% or do you think the May 2022 rates will be above 3.52% so better to buy in November?
Ralph says
It is your cautionary language I quoted, about missing a month of interest if you cut it too close, that is confusing to me?
Harry Sit says
It takes one business day to issue the bonds and possibly more days if there’s a delay. If you buy close to the end of the month and they don’t issue the bonds until the beginning of the following month, you won’t get the interest for the previous month, whereas if you buy on the 20th of the month, you will have the bonds issued before the end of the month and get the interest for that month. Therefore, don’t cut it too close to the end of the month, or else you may lose a month of interest. If you buy on the 1st, 5th, 10th, or 20th of the month you’re far off from the end of the month. You’re cutting close if you buy on the 28th, 29th, or 30th especially when there’s also a weekend.
On the other hand, if you want your bonds issued in November, buy in November. The 1st, 5th, or 18th all work.
Pan Tangible says
I didn’t see your warning about switching banks until it was too late. I sent in my paper form complete with medallion about two weeks ago. Any sense of how long they will make me wait before I can purchase again?
Harry Sit says
I heard 3-4 weeks. The rate is good for six months and you always get the full six months on the rate after you buy.
R says
Call them. You want to avail yourself of purchase limits in 2021 AND 2022.
Pan Tangible says
Surprise! I emailed them and was told my new banking link is good to go! Maybe they are getting on top of this issue.
Jonathan says
Is there a phone # in order to speak to someone?
Harry Sit says
Customer Service (844) 284-2676.
Anon says
Hey Harry,
Thanks for the insightful blog post.
My spouse and I both buy I-bonds under our SSN. We also have an LLC (One rental property) with its own EIN number. Can we buy an additional $10k of I-bond under the LLC name?
Thanks!
Harry Sit says
The LLC (or other forms of business) can buy up to $10,000 each calendar year.
Pan says
I will be poised to pounce after the New Year with a ready-to-go tax return. The IRS took four months from when I filed my taxes (May) to purchase paper ibonds for me (September).
I don’t want to risk missing out on 7.12%
And this time I will adjust my refund so I get some Einsteins!
Kevin says
“And this time I will adjust my refund so I get some Einsteins!”
What are “Einsteins”?
Harry Sit says
The $1,000 denomination paper I Bond bought with the tax refund has a portrait of Einstein.
R says
I thought they were bagels 🙂
R says
Harry, any way to use irs form 8888 and supplement(?) it so that a filing couple can have more than two additional ibond individuals as entries? Seems to me that this form is just a form and one is not limited in the numbers of individuals to the number of spaces there but only the $5k total maximum. Like to have issued some paper ibonds from tax refund to all the grandkids, not just two of them. Thanks
Harry Sit says
From Form 8888 Instructions on page 3:
“You may request up to three different savings bond registrations. However, each
registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be
more than $5,000 (or your refund amount, whichever is smaller).”
One of the “up to three” is reserved for the tax filer (plus spouse if filing jointly). You only have two free-form entries.
R says
Thanks, Harry…Has anyone contacted Treasury on how one can buy ibonds from tax refund for more than 3 individuals? Seems to me that there is nothing magical about 3, along as total is not more than $5k. Thanks
MalMel says
Thank you for all of the very thorough info you provide.
2 questions:
I have an insurance trust (I was beneficiary from my mother’s life insurance, she had a trust setup for it). Can I buy ibonds in that trust?
Also, is there an easy answer to why ibonds are preferred over TIPS? I see much written about ibonds, not much on TIPS.
Harry Sit says
You can buy I Bonds in a trust if you’re the trustee. If you’re only the beneficiary you’ll have to ask the trustee to do it.
I Bonds are preferred over TIPS because they match inflation whereas currently 10-year TIPS are priced to lose 1.1% per year to inflation for 10 years.
Anand Kumar Sankaran says
Harry
Thank you. I started buying I Bonds. I have a question about redemption. A colleague pointed me to this thread: https://www.bogleheads.org/forum/viewtopic.php?t=204948.
How is the redemption process? Looks like treasury wants us to get a medallion signature or something? Or is it dated?
Harry Sit says
The normal redemption process is described in the “Cash Out (Redeem)” section. It doesn’t require a signature guarantee. You click on a link, choose which purchase you will cash out from, enter an amount, and that amount plus the accumulated interest will show up in your linked bank account on the next business day. You log in again next January to download the tax form for the interest.
Robin says
My parents are interested in purchasing $10k in I Bonds, but don’t feel comfortable linking their bank account to any site. They don’t have online banking and aren’t tech savvy. While I’m sure it is safe, they are still uncertain. Any suggestions? If I link my bank account (in my name) to their treasury direct account to make the purchase I assume that is a red flag? Should I instead gift them this amount? Looking for feedback.
R says
I suggest you first look at some of their bank monthly checking statements (now) and you probably see electronic payments or ACH entries. No way that I know how to stop them. They then have ebanking. Otherwise they don’t have any banking and can’t use treasurydirect as I know it. Call treasury and see what they think
Harry Sit says
Robin – You can buy I Bonds as a gift for your parents but they’ll need a linked bank account eventually when they cash out/redeem. Please contact TreasuryDirect and ask whether they have any problem with having a different name on the linked bank account. The signup page asks for the name(s) on the bank account, which implies that the bank account can be in a different name than the primary owner of the TreasuryDirect account.
As noted in the guide, please be sure to link an account that you’ll keep forever because it isn’t easy to change the link in the future.
Anand Kumar Sankaran says
Thanks Harry.
Ralph says
Set up a second bank account, linked to their primary account, and only put the money they want to use for purchasing the I-Bond in it.
Kevin says
Be sure to read this – the bank/brokerage that they use to originally transfer the $10K (or $20K, for two I-Bonds) may matter down the road when they wish to cash them out. Changing to a different bank to cash out can be a hassle:
https://www.reddit.com/r/Bogleheads/comments/q8oh1u/sold_on_ibonds_what_about_withdrawing_cash/?sort=old
Robin says
Thanks for all the great feedback. After much review, they have decided to open a secondary bank account in their name, soley for this transaction.
Harry Sit says
When the secondary bank account is rarely used, make sure the bank doesn’t close it due to zero balance or inactivity.
R says
The problem is the so-called link. Even without it, the rule on offsets would permit the bank to take the funds from all other accounts in case of something bad happens. Has to be at another bank with enforced no overdraft protection (with no ties to any other accounts). However, redemption has the funds coming back. I submit the parents receive or will social security or other direct e-payments and where do they think they received stimulus checks?
Ralph says
The rule of offsets does not apply to hacking situations, which is what I think Robin’s parents are concerned with.
R says
One doesn’t know it is a hack (ever try to prove a wrongful ACH, good luck) until way later and in the interim who advanced the $s…bank.
Eric P says
Thank you for a great article.
I have a spouse and 2 kids. So two invest 40K for this year, I would need to:
1. Create TreasureDirect account for me and put 10K
2. Create account for my spouse and put 10K
3. Create linked accounts for 2 kids and put 10K in each account
Is that correct?
Would it be possible to add my spouse and kids directly to my account using “Add New Registraton” on BuyDirect screen, or I have to create 4 separate accounts?
Harry Sit says
Four separate accounts. Please note the bonds you buy in a kid’s name belong to the kid. It’s similar to a UTMA account. The money can only be used for the kid’s benefits. Here’s some basic information on custodial accounts:
https://www.schwabmoneywise.com/essentials/custodial-accounts
Todd says
I sent that stupid form in 2 weeks ago. A got a generic email a few days ago saying it was received and will be reviewed but the website still says that it hasn’t been received. Do you know how long this process will take and if all that sounds correct? Thanks!
Harry Sit says
Not sure which stupid form. If you’re talking about depositing paper I bonds, my last deposit took 26 days. See How To Deposit Paper I Bonds to TreasuryDirect Online Account. Just wait and check every 30 days. You keep the original issue date and interest rate. You don’t lose anything while waiting.
If you’re talking about switching banks or other ID verification, see comments #40 and #41. Two weeks is normal. It’s probably going to take longer with more people wanting I Bonds now. Contact customer service if it’s not done in another week.
Steve says
How long can you leave an I bond in the gift account after purchase before it has to be transferred to a new account? Does the newly purchased I bond generate interest while it remains in the gift account?
Harry Sit says
No time limit before the bonds mature in 30 years. The gift bonds earn interest before getting delivered to the intended owner.
E$ says
If I buy I-Bonds for my LLC, how do I then get the money to me? Can I sell them and then just take the proceeds as a draw to myelf from the business? And if it is from an LLC that we currently do nothin with (long story), would that mean we have to do taxes for that LLC that year? THANKS IN ADVANCE!
Harry Sit says
The bonds belong to the LLC. If the LLC sells them, the money goes to the LLC’s checking account. You can do whatever you normally do with any other money in the LLC’s checking account. The LLC earns interest income that year. Taxes must be handled however the LLC is taxed (sole prop, partnership, S-Corp, etc.).
john says
It appears that multiple LLC’s partnerships, s-Corps, etc. can EACH purchase $10K of bonds per year (as long as they have a separate EIN number) even if the various entities are owned/controlled by the same person(s). Is that correct. Thank you!
Harry Sit says
That’s correct, in the same way each of those separate business entities can have its own bank account.
R says
Harry, in your reply to John, are you suggesting separate bank accounts are required or merely advisable for different businesses? Having a different tin or Soc sec number coupled with schedule c irs filing should be suffice… right?
Harry Sit says
There must be good reasons to set up those business entities separately. Having separate businesses share a bank account with each other or use the owner’s personal bank account defeats the purpose (“piercing the corporate veil”). I don’t know whether TreasuryDirect cares but I would think you want a separate bank account for each business anyway.
R says
Thanks, Harry
John says
If I invest $10,000 in an I Bond can someone gift me another $10,000 of I bonds in the same year?
Harry Sit says
Having a gift delivered to you counts against your quota in the year of delivery. Someone can buy the bonds as a gift intended for you and keep them in limbo until you’re not buying them yourself. So technically yes but practically maybe not worth doing.
JohnD says
I’ve just run into a snag while filling out the Individual Account Application at the TD website. When I get to the “Bank Information” section, there is not enough space in the “Names on the Account” box to type both my name and my wife’s name as they appear on our joint bank account. Apparently the box only allows for a limited number of characters, so when I try to type my name and my wife’s name in full, I only get as far as JOHN WILSON / ELIZABETH WIL (for example) and then can’t type any more. How do I get around this problem? I can’t find any instruction regarding this on the website. Would it be okay to type JOHN & ELIZABETH WILSON? I can’t imagine that many other people haven’t encountered this same problem. This is pretty frustrating; our names are simple and not very long.
R says
What if there were 3 or 4 on the account? We are not asked to provide everyone…and clearly if space/character restriction it is by them! The step transaction of removing a spouse would work and then add him/her back later! But seriously…I only listed myself when checking was in the names of more. If they don’t like it…they can reject and then..
R says
John, I revisited what I used in my registration of TD accounts for bank checking accounts. I used only the last name when there were more than one on bank account…of course they all had the same last name. Good luck
R says
Just changed a checking acct to another at the same bank…did not need to have Form 5512 signature certified b/c a previous certified signature had been submitted a couple of months earlier. From time of mailing form to receipt of acct change confirmation email it took 18 calendar days.
pradcliffe says
Thank you. This is the best article on i bonds I have ever seen. Because of the level of detail, the article answered two questions I for which I could not find answers anywhere else, including the Treasury Direct website.
MK says
If I buy iBonds in the name of my (legitimate) sole proprietorship, can I leave the bonds in the name of that business indefinitely until I’m ready to redeem them, even if I stop operating the business in the future?
And with this in mind, would it be advisable to set them up with a bank account that I plan to leave open long term (even if it’s the same account I use for my personal and trust TreasuryDirect accounts), vs my business checking account that may be closed in the future?
Harry Sit says
The bonds belong to the business. You should dispose of its assets (sell or transfer to personal name) before you shut down the business. You lose the authority to act on behalf of the business once the business ceases to exist.
ccg says
What a great article! Here are my questions .
I’d like to buy 10k of bonds for each of 3 children (young adults) every year as an investment for them. Do they need a Treasury Direct account set up if they don’t plan to cash them for many years? Can I just keep adding them to the Gift box? Or must they be delivered to their account each year to count as the limit for that year?
Any other way to approach this? I can’t imagine they will have the same checking account for the next 20+ years!
Thanks!
ccg
Harry Sit says
You establish a Minor Linked Account for each of them in your own account. See instructions here:
https://www.treasurydirect.gov/indiv/help/tdhelp/howdoi.htm#openminor
ccg says
Thanks, but they are adults in their 20s, not minors.
Harry Sit says
Sorry, missed that. I was thinking of young adults in library terms (13-18). An adult needs their own account eventually to cash out. You don’t have to deliver the gift each year but the bonds are in limbo until they are delivered. If that’s intended, no problem.
Marion Julius Nesmith, Jr. says
Good morning,
I have an old laptop and plan on purchasing a new one next year.
I think you said something about using the same computer to set up the portal.
Will I be able to communicate with the new device without problems?
Thanks, Marion
Marion Julius Nesmith, Jr. says
I found my answer…One-time passcode…(OPT) Good Read
https://www.treasurydirect.gov/indiv/help/TDhelp/help_ug_274-SecFeaturesProtectAcctLearnMore.htm
Robert Just says
• Sign Up For Fiscal Service Mailing Lists: Savings Bond Lists
You may subscribe or unsubscribe to Fiscal Service mailing lists for savings bonds news and information from this page.
https://www.treasurydirect.gov/maillist/maillist3.htm
Marion Julius Nesmith, Jr. says
I have a few old…paper…savings bonds.
Is there a way that I can move these to T/D?
Marion
Harry Sit says
See How To Deposit Paper I Bonds to TreasuryDirect Online Account.
Dawn says
Received I-Bonds as a gift several years ago. Should I already have an account opened by the giver?
Harry Sit says
How did you receive the gift and where’s that gift now? If you received paper bonds and you still have those on paper, you don’t have an account. If you received the gift electronically, maybe you don’t remember you opened an account back then. The giver can’t open an account for you. Only you can open an account for yourself.
JS says
Thank you for a very well written and organized guide to the Treasury Bond purchase process. It is always a pleasure to see something that gets through the clutter and down to the basics of “how to get it done” in a straight-forward and efficient way.
Sam says
Hi,
Can I purchase 10k in ibond in my individual name with my social security number plus purchase another 10k in the name of my revocable living trust that has my social security number too in a calendar year. I am the grantor and the trustee of the Revocable Living Trust.
Thank you for your answer in advance.
Brad says
According to Harry’s articles here:
https://thefinancebuff.com/simple-living-trust-software-i-bonds.html
-and-
https://thefinancebuff.com/buy-more-i-bonds-treasury-direct-trust.html
You can. Whether this falls afoul of the intent of the Treasury Direct instructions or not, it doesn’t appear to be clear. He does offer this caveat at the top of the first link, “Please note I’m not a lawyer. I’m only sharing what we did for our own situation. I’m not recommending that you do the same. Please take this as only an anecdote.”
YMMV as they say. Harry, if you have further clarification or perhaps some language from the TD site itself on how “gray” this area is, let us know. Since it’s not totally clear, I imagine the worse thing that could happen is they could force you to redeem a bond early? Or could they confiscate any accumulated interest over decades?! I don’t know. (IANAL either!)
Harry Sit says
Brad – A trust having a separate quota from a person isn’t gray. A trust is still a separate entity from the person even if they happen to have the same tax ID. The caveat you quoted is about creating a trust, which is normally done by a lawyer but I did it myself with software.
Ted says
Thank you so much for this wonderfully informative tutorial. It made dealing with the clunky treasurydirect site bearable.
George says
I have had, and plan to continue to have, solid longstanding relationships with my credit union (which honors ACH transfers) and my brokerage account (TD Ameritrade/Schwab). Any generic advice on which would be preferable “bank” linked to Treasury Direct account? Thanks for excellent tutorial.
George says
In answer to my own post #75, I found that my brokerage firm has a separate checking account # than the brokerage account #. Never used it, but was told that cash from brokerage would automatically move to checking to cover Treasury Direct debit on ACH transfer.
Your very comprehensive and enabling blog also presents challenges on balancing short-term investing and tax management issues vs. longer-term benefits. I may be overly conservative on tax emphasis, but I currently work hard to ensure that our combined annuities as seniors and other income do not exceed the 12% taxable threshold that enables ETF and mutual fund capital gains and qualified dividends to be tax-exempt, relying heavily on tax deferred accounts and municipal bonds.
If I followed a discipline of annual I Bond purchase of $25,000 ($10,000 x 2 plus $5,000 income tax refund) and redemption at the penalty-free five-year point, for a nominal inflation rate of 2.5%, I calculate the taxable interest to be in a range (about $3,285) which would allow me to stay below the 12% “radar.” Holding too long could result in 22% taxation on capital gains and divvies as well as additional 10% (22-12%) on the I Bond interest. The downside of this scenario is limiting deferred taxation to interest on I Bond total of $125,000 (5 x $25,000). From a longer term and estate planning point of view heirs might be less concerned about the tax management. The math and other subtleties hurt my head a bit but I would appreciate any comments on the general considerations. Sometimes the best course of action is to punt – mix and match?
One last specific question: If the I Bonds eventually go to beneficiaries is your caveat about choosing a “forever” Treasury Direct linked bank valid or are beneficiaries at liberty to direct their I Bonds to their own banks?
And finally – I haven’t seen the interrogatory words (adverbs?) “who, when, where, how, why and what” used together since an elementary school classmate, whose father was an English teacher, sprang them on the class as collectively covering all forms of inquiry – charming! Thanks.
Harry Sit says
Beneficiaries will transfer the bonds to their own account. They will need to link a bank account when they open their account. Ideally it should be their “forever” bank. It’s not impossible to change the linked bank account. It requires getting a form stamped by a bank officer, mailing it in, and waiting 2-3 weeks.
Pan Tangible says
My head hurts just reading this!
My strategy on this is more of a philosophy, really, because aiming for perfect maximization in an unknowable future will hurt your (my) head every time. So my philosophy is to be aware of shifting and evolving opportunities to move my money to a better place. I was in CDs when they were paying more, moved to I Bonds when CDs disappointed. Maybe the day will come when Interest Rates get high enough that I’ll gradually move out of I Bonds.
But I’ve learned I will never get an answer that gives me perfect clarity when One of the variables (the future economic situation) is unknowable.
Just my two cents.
Trust yourself . When the time comes you will make a good choice.
Brad says
George, perhaps I’m oversimplifying, but if you have (taxable) assets that you’re investing in municipal bonds and those bonds pay a better **real** interest rate after taxes: that is, adjusting for the not taxed aspect of munis (that’s a plus/+) and also adjusting for inflation (that’s a minus/-), then you should just buy more munis and not buy I-bonds, in my opinion, as you’re getting a better return from them.
If on the other hand, you get a better interest rate from an I-bond (after paying tax, even if your long-term marginal capital gains tax rate is 15% or 20%–there is no 22% for long-term gains; I believe after holding for 1 year and 1 day, it’s all long-term capital gains on an I-bond, when cashed out say, after five years as you suggest), then you should buy I-bonds, even if you’re paying 20% capital gains tax rate on the proceeds. What matters is how much money (interest earnings) you’re ending up with in your pocket, after taxes.
For example, if the munis pay, say, enough interest to earn you $2,500 in interest after five years, but your I-bonds pay $3,285 – 15% (492.75) = $2,792.25, then the I-bonds are a better deal, even though you’re paying a 15% marginal tax on them. Same goes for the 20% rate: $3,285 – 20% ($657) = $2,628. Both of those are more than the $2,500 the munis pay. Obviously if the munis pay $2,800 or more, you should buy those, unless you’re in the 0% bracket.
As for tax-deferred accounts, you will need to estimate what you’ll need to distribute from those in the future–and make a wild guess at your future tax rate. Because I-bonds cannot be purchased in these types of accounts, that calculation only applies to buying I-bonds in the sense of calculating your future marginal capital gains tax rate(s)… and of course Congress can change those at any time, so I wouldn’t rely on anything too many years out anyway.
As for prepaid tax accounts, such as Roths, there will be no tax (you paid it going in) upon withdrawal, so no affect on your marginal capital gains rates in future (again, assuming Congress doesn’t change anything on us).
Neither of the last two (neither tax-deferred, nor prepaid) are available to invest in I-bonds anyway, so you will have to choose alternate investments in those.
Am I missing anything here? You should try to make the best after-tax return you can! 🙂 One other tricky bit indeed, is estimating what the “real” (after inflation) rate of return will be, given none of us knows what inflation will be in the future, hence it’s hard to know whether a muni will be a better return or not. My guess is that your 2.5% sounds about right. We’re excited about the 7.12% these I-bonds are paying now, but if the Fed does what we have our Presidents appoint them to do, they should try to get/keep that rate down under 2%, with occasional blips like we’re seeing now. So maybe that 2.5% is about right to compare your Munis to. Are you earning 3% on a Muni (0.5% real rate)? I kinda doubt it! If you are or can, they might be a better deal. If you are getting less than that (again, we’re making a BIG assumption about long-term inflation here), then maybe I-bonds are better.
Harry Sit says
Please note that interest on I Bonds is ordinary income. The more favorable capital gains tax rates don’t apply to I Bonds.
Brad says
Oh, good to know! I missed that!!
So then the same thing applies, still best to make the best real interest rate one can (whether compared to 22%, 35% or whatever), except if I-bonds are ordinary income (accrued all at once, upon a redemption) then one may wish to spend those funds instead of purchasing I-bonds/saving them with I-bonds, rather than draw from prepaid tax accounts like a Roth. Drawing from a tax deferred account is even worse, as all of those gains are income, unlike I-bonds where the principal has had tax paid and only the interest is ordinary income…
Sound about right?
R says
My head is spinning too! May I suggest (I’m over72) a greater focus on reducing current expenses…which will increase non-taxable income! I’ve got RMD issues each year from IRAs and take the needed amount (including QCDs +) year end to target the tax bracket I want for year-end and currently put those (not needed for current expenses) into ibonds (I have multiple TD accounts) as a parking lot until CD rates change…long term hold of IBONDS not an option (given age and fluctuations in CPI over the years) and ignore as noise any 3 month EWP (which is really 2 if purchase at end of month). As a reminder, Soc sec use to be tax free and if Congress needs (more) funds an option is to target other so-called tax deferred (Roth, Muni, etc) accounts!
Chris says
I’m having trouble with the Treasury Direct website, not allowing me to add my wife’s name as secondary owner for the bond purchase. Not enough characters allowed in the box. Actually, there was no particular field to add a secondary bond owner, just the one field for owner name (s).
Setting up the account and purchase on an iPad.
How do you add a secondary owner to a bond?
Harry Sit says
The second owner is at the holdings level, not at the account level. The account has only one owner. The bonds you buy in a personal account can have one owner, one owner with a second owner, or one owner with a beneficiary. You specify that at the time of purchase. Please read the “Registration” section in this post.
Chris says
I did buy purchase the Bond after registering. Maybe it’s a display thing with the iPad, but the Name(s) field on the purchase order would only allow something like 18 charachters, and I did not see a separate field for second owner, or beneficiary.
Wish there were a screenshot of the purchase order page to look at.
Once the money gets there for the bond and it shows up on my registration page, I’ll try to add her.
When I buy the other one in her name, I will try to screenshot what I’m seeing.
Pan Tangible says
On Form 8888, to buy bonds with tax refund, they don’t want a middle name, just first and last. Does that help shorten her name?
George says
Follow-up to Post #75 (could not insert there) – Pan Tangible, Brad, Harry Sit and R: I’m a relative newbie to munis and have two bonds, two ETFs and two mutual funds, having held them all for approximately two years, with yields ranging from 5% (just recently called, fairly predictably) to 1.7%. Your replies caused me to do a little spreadsheet evaluation for periods and relative amounts held, producing a weighted average yield of 3.3%, obviously not beating “real” inflation now, and barely a nominal 2.5% Quantifying these returns reinforced your “two cents” philosophy and flexibility in finding the best after-tax returns. Thank you for indulging my head-hurting exercise, the opportunity to learn more about I Bonds and share thoughts on this blog.
R says
George, I reiterate here my past comment. And…What are “you” looking for, ie what is the goal? And remember to focus on the delta in rates, ie I can get this but in lieu thereof could get that, and the risk. If one has no debt, retired (meaning you have “enough”), etc what are you chasing? For example ETFs are merely an index fund, like Bitcoin, or (to date myself) fund of funds…there is no economic value there…in my view. Municipals have market risk. Where do you think debt instruments (except ibond) are going with higher interest rates on the horizon? Want a flyer, go to Vegas.
Guacamole says
Thank you for the great blog, Harry! I am looking to max my 2021 purchases of I Bonds. So far I did 10k personal and 10k trust.
I have a fulltime job and dabble with assorted side hustles such as tutoring, DoorDash deliveries, etc. I don’t have a separate EIN, I just report this income on Schedule C. This year, I will have far less than 10k of Schedule C income.
Can I consider myself a sole proprietor? And if so, can I purchase 10k of I Bonds as a sole proprietor, or am I only allowed to purchase up to my Schedule C income?
Harry Sit says
I added a new section for side hustles and gig work in Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp.
Lou Petrovsky says
Great blog!
A question regarding the purchase of up to $5,000 of paper bonds with the proceeds of a federal income tax overpayment. As 2021 tax returns cannot be filed until 2022, does that mean that I-Bonds purchased with tax refunds will be dated as of the date of filing (or IRS receipt?) of the 2021 tax returns, even though payment(s) that resulted in the refund might have been made in 2021?
Harry Sit says
That’s correct. The bonds will be dated when the savings bonds department fills your order after the IRS finishes processing your tax return. Please read more about this in Overpay Your Taxes to Buy I Bonds.
DaveG says
Do you know how to actually reach a person at Treasury Direct? My TD account is older and I haven’t accessed it for a couple years. I used to use payroll deduction. I went in yesterday wanting to buy an I bond and it told me my account was locked. Only option is to call the phone number provided there is no online or automated reset function. 2.5 hours after being placed on hold I hung up. So today 12/15/21 I called at 8AM went through the prompts and placed on hold once again. I thought I’d get an early start in their que which they will eventually answer for they say in their repeated message which I’ve now heard 100’s of times every 20 seconds for the last 8 hours that my call is very important to them. Unfortunately it’s not. No one is working that phone number. My call should have been answered within 8 hours. Resetting a locked account is a couple minute task. I also used their contact us form to send a message and remain doubtful that will go anywhere. My next step is to send my phone logs to my congressman showing how long I’ve been on hold and unable to reach anyone. He’s the only government person I know how to reach and ask for assistance. Frustrated.
Hop says
Same experience for me. Left the phone on speaker for over an hour listening to their message, and gave up.
Heaven forbid someone needs urgent help to say, redeem a bond that has some administrative issue.
Harry Sit says
I don’t know any other way to reach customer service beyond the three channels listed in the “Customer Service” section of this post: contact form, direct email, and toll-free number. When you get hold of customer service, they may want you to get a signature guarantee on FS Form 5444 anyway. I would do that and mail it in if I run into the same situation.
Pan Tangible says
I just discovered that the Wall Street Journal printed an article today advertising the 7.12% of I Bonds. Perhaps the phone lines are deluged.
Rob says
In late December (2021) I had to call for help and other than the long 31 minute hold, the service I got was great. My new trust account had an issue after I mistakenly clicked the bank account as checking instead of savings which caused the transaction to be denied. The woman I spoke with was very helpful, adjusted the account type and my transaction was put through again with immediate success. I know they get a bad rap in some comments but I experienced great customer service, other than the wait time.
I know we all want things done immediately but sometimes patience is a virtue ( as they say).
Gina says
Harry, Wonderful info on buying I-Bonds through a Trust acct that I came to know only because of you. Thank You!!
On the Treasury Direct site, they ask for an “IRS Name control” assigned by IRS for the entity. https://www.treasurydirect.gov/indiv/TDTour/open_account_entity.htm
We don’t have an “IRS Name Control” for the Revocable Trust that we have under Joint Ownership. Per our attorney and as you also state, we can use (either of our) SSN as the entity tax ID. Do we need this “IRS Name Control” to setup the Trust acct?
Also, did you have to mail the Certification of Trust paperwork to Treasury Direct?
Harry Sit says
The text below the “IRS Name Control” says to use the first four letters of the last name when you’re using a Social Security Number. So just do as instructed.
I was not asked to mail the Certification of Trust. Do so only when they ask for it.
DAveG says
Pan you don’t need to call them to setup an account or buy them so that wouldn’t generate an influx of calls and I tried yesterday too before that article…I was holding 8.5 hours for an account being locked which takes 1-2 minutes to resolve or 0 minutes for them if they allow an automated reset which modern organizations do. There’s no way I had that many people ahead of me in que given I was holding from 8AM to 5PM letting it go all day with the call never being answered. It’s clearly from no one handling calls.
Harry Sit says
If the old account is empty, you may also consider opening a new account from scratch. I hear they automatically close empty accounts after a number of months of inactivity.
Gina says
Harry, Thanks for the quick response on the IRS Name Control question. I just opened the Trust acct online with no problems. God Bless You!! You saved me so much headaches (with my OCD fears dealing with Treasury Direct) because of the simple, detailed instructions on your site. I messed up by posting the Trust acct question here instead of on the other Blog post for it. But your site has soooo much good information! I am like a kid in a candy store!
Gina says
About calling the Treasury Direct Helpline. I don’t know if things have changed much in the past 3 years since I ran in to the same issue. I did the same thing as calling at 8 AM in the morning etc. Finally after many days, when I got through and asked about it, I was told (if my memory serves right) that Mon – Wed are busy days, so Thu and Fri after 3 PM EST is a better time to call. So when I had follow-up questions, I did the same and the wait was not so bad. 99% of the Customer Support people there are good and very helpful. I was dealing with converting accounts of a Deceased relative to the spouse and it was very stressful due to my time constraints. They handled it very well when I got through.
R says
I anticipate using a tax refund to buy up to $5k in paper ibonds early next April for me and 2grandkids …but first maxing out my $10k TD account in late January. Any problem doing tax refund last?
And I cannot move the tax refund money intended for me to my TD account in April since I would have maxed out purchases for the year?
Harry Sit says
Buying paper I Bonds with the tax refund money is a completely separate process. It doesn’t count toward the $10k purchase limit. See Overpay Your Taxes to Buy I Bonds, and after you receive the paper bonds, How To Deposit Paper I Bonds to TreasuryDirect Online Account.
Pan Tangible says
The tax refund never goes into your TD account. The IRS buys the bonds for you directly using the money you already gave them.
R says
Pan. Is the example u cite for paper bonds or TD ibonds account being bought by irs ? The tax refund can go into your TD account since that is an option in part 1 of 8888. Never is not quite there
Harry Sit says
The IRS doesn’t ask for your TreasuryDirect account number. They take your tax refund money and order the bonds with the name(s) and address from your tax return. The department that fills the bond orders doesn’t look up your TreasuryDirect account number. They print the bonds with the names and address and they mail those to you. People buying paper bonds with the tax refund money aren’t required to have a TreasuryDirect account. If you want to deposit those bonds into your TreasuryDirect account, you’ll have to follow a separate process.
Jeff Somers says
Your comment on taxation is a bit misleading. Yes, you can wait until maturity to declare the interest in you income. However, you do have the option of declaring the interest annually on your tax return. In some cases that can be better, especially for younger buyers who don’t have much (or any) taxable income to report.
Dunmovin says
I did a change in accounting from normal cash to accrual years ago for child to have income/interest on bonds recognized each year. As I recall I did have to make the request to irs which was not a problem (then).
Dunmovin says
Harry, thanks for great work and have a great Holiday Season!
Dunmovin says
Harry, I see the following
“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.”
The above is the last q/a at
https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm#gift
this would strongly suggest one could buy up to $15K in tax refund paper bonds but only for the 3 entries on form 8888. Any thoughts? Thanks
Harry Sit says
From Form 8888 instructions, page 3:
“You may request up to three different savings bond registrations. However, each registration must be a multiple of $50, and the total of lines 4, 5a, and 6a can’t be more than $5,000 (or your refund amount, whichever is smaller).”
Line 4 is reserved for yourself (and spouse if filing jointly). If you’re buying for others as gifts, you have only two entries and the sum total between yourself and two gifts can’t exceed $5,000.
Pan Tangible says
So WHO to believe? The Official Treasury Direct website, or IRS form 8888 Instructions? Its a quandry!
Dunmovin says
Pan, reading the “news” from time to time on the TD website one currently sees…
“Fiscal Service Aids Savings Bonds Owners in Kentucky Affected by Severe Storms, Straight-line Winds, Flooding, and Tornadoes; One-year minimum holding period waived”
NOW…in addition to that possibly important news to some is the use of waivers…a big kicker is the $15K tax refund in Ibonds cited above…why don’t you email/write for a waiver of the flaw in the instructions in form 8888 so that one can comply/use the import of q/a also cited above AND say this will clear up any confusion, be conforming, i.e. not changing anything, and allow for Treasury to conform/coordinate all their documents in a proper rule promulgation process!!! TD’s interpretation should (also) control since it is the ibond issuing organization, not IRS! We only have one Treasury Department! Go for it! Harry, do you have a plan B?
B says
I found it super simple to open up a couple of living trusts one each for my wife and myself. So we have purchased $40k this year between the two of us. Afaict, one could create as many trusts as one wants, though I’m guessing after the 3rd 4th or 5th, the Treasury Direct folks might shut the whole thing down for whoever was so cheeky as to do that?
Technically however, a trust is an “owner” of the bonds, so as many trusts as one creates is how many you can buy…
Rick.M says
Very informative. Thank you. I’m married, file jointly and we have a joint revocable trust that holds all our assets. The trust has an entity account and we each can have individual accounts. Wouldn’t that enable us to purchase $30,000 (3 x $10k) yearly? Seems like a nice way to accumulate savings that won’t be needed for several years… funds currently wasting in bank savings accounts or money market funds.
Also, could you please clarify the process of eventually moving bonds to 1 account? More than likely getting contributed to the trust’s entity account. What are the limitations of moving Series I bonds (not redeeming)?
Harry Sit says
Yes, please read Buy More I Bonds in a Revocable Living Trust. Today is the last day to buy for 2021.
Robbie says
Hope you didn’t buy $10,000 @ 3.54% interest shown in the example? Rate is 7.12% now! May have been better to buy $833/mo.? (or at least $5000 every 6 months?)
Harry Sit says
I did buy $10,000 @ 3.54% interest shown in the example. Rates change with inflation every six months. That $10,000 started earning 7.12% in November after earning 3.54% for six months. If I didn’t buy in May, it would’ve earned only 0.5% in a bank savings account from May to October. All purchases will go through all rate cycles. The only difference is the first cycle and the last cycle. The sooner you buy, the sooner you start to earn more than the rate in a bank account. If rates go higher, you will catch up to it anyway, just as my purchase in May did.
CalifornianSS says
Harry, you mentioned in the post to initiate the purchase way before the end of the month. If I purchase it today (Dec 30th), how realistic is it for me to make it in the Dec date and also make it count towards the 2021 yearly limit. Kicking myself for forgetting about this! Thanks!
Harry Sit says
Chances are slim but you have little to lose, assuming you have the money in your bank account. Having your purchase count as 2022 has the same result as not trying and waiting to buy in January.
Brad says
I just logged in and they are still showing 12/30/2021 and 12/31/2021 as purchase dates. If you select today, it may work. I went through BuyDirect and chose 12/30/2021, it (on the final page before I would click submit) said:
Purchase Date(s): We may have changed your purchase date(s) to the next available business day.
12-31-2021
So if you put in today’s date (12/30/2021), you might get them purchased tomorrow, in 2021. Be sure funds are in the account!
CalifornianSS says
Thanks so much for your replies Harry/Dunmovin/Brad. I went ahead and do a purchase for myself and my spouse and also noticed that the purchase date allowed 12/30 and was changed to 12/31 (as Brad said; thanks for taking the trouble to login and point that out as well) so hoping it’ll go through by tomorrow!
CalifornianSS says
To close the loop on this, my purchase made on 12/30 was deposited on 12/31, so I squeaked by this time! Looks like the TreasuryDirect website was accurate when it moved my date to 12/31. My credit union account was also debited early this morning as expected. Thanks, I won’t push the limit next time!
Dunmovin says
Try it , you may (not) like it…I’ve never seen any of my purchases be consummated on the same day entered BUT today is the end of the year. You may be able to cancel if you don’t like it but why won’t you?
Jeff Somers says
My experience is that buying on the same date you are ordering results in the bond being purchased on the next day so you have to do it one business day before the last business day of the month to count for that month/year. However, when I scheduled a purchase for the 29th ahead of time (based on e-mail advice from Treasury Direct to purchase by then for 30th entry as the 31st is a holiday per Treasury Direct), I discovered that the bonds were actually in my account on the 29th and the debit processed on that evening in my checking account. So it appears when you schedule the purchase ahead of time, the purchase actually occurs on that date. If you are purchasing the same day, it will be the next business day for the bonds to be purchased and show in your account.
Jim says
Very helpful information! If I buy an I-bond today on 12/31/21 (transaction date), but when filling out the order on the Treasury website, it moves the purchase date to 1/3/22 as the next available business day. Does the annual purchase limit go by the transaction date if I submitted it on 12/31 or the actual purchase date? I know this means that I probably won’t get interest for December, but I want to at least make sure that I can then make another purchase in 2022. Thanks!
Harry Sit says
Sorry, that’s too late for 2021.
Jeff Somers says
It goes by the actual purchase date. This would not be a 2021 purchase or get you December interest. It would be a 2022 purchase. Always purchase near the end of the month but not on the last day so you get that month’s interest. Special note: If you purchase on the same day you are ordering, it will be in your account on the next business day, i.e. if you order on the 31st it will not be in your account until the next month. However, if you schedule the purchase in advance, it does show up in your account on the day you designate for purchase. In that case, you could schedule the purchase for the last business day of the month, but I would schedule it a day ahead of that just in case.
Dunmovin says
Has anyone seen any numbers on purchases/redemptions for ibonds in recent months including In particular December 2021?
Mark says
Great article. I bought $10,000 for myself and then gifted $10,000 to my wife. Now I see in your article that I should have had her open her own account and buy the bonds herself. I changed my registration so that I am primary/she is secondary on my $10k. Can she change hers to make me a secondary for the gift I gave her?
I don’t want to run afoul of the limits. Thanks!
Harry Sit says
When she opens her account, she doesn’t buy again. You deliver the gift you already bought to her account. Then it will be like she bought those bonds herself. She can add you as a secondary owner after she receives the gift delivery. See Buy I Bonds as a Gift and How to Add a Joint Owner or Change Beneficiary on I Bonds.
Kay Jackson says
My folks purchased I bonds about 20 years ago. Do you know if the $10,000 per personal annual purchase limit would have been in place back then? They have some years where I think they purchased more than that limit. Would that have even been possible?
Thanks for this post. I have a lot of new things to learn now that I am helping them with their finances, and this pretty much took care of what I need for I bond education!
Harry Sit says
The limit was $30,000 per person per calendar year in the beginning. You could also charge the purchase on a credit card and earn miles or cash back reward back then.
Judy B. says
I have I Bonds nearing $100,000 and good for another 10 years so they will greatly exceed $100,000. They are in a single account with a beneficiary. I stand to inherit a similar amount of I Bonds that are in a trust with me as beneficiary, (which I will then put into my account with a beneficiary or put them into my own trust). I find TD’s information that “if the total value of the bonds and other Treasury securities is more than $100,000, federal regulations require they be administered through a court” confusing. Are accounts with a beneficiary and trust accounts exempt from this rule? If so, does that mean I can keep buying I Bonds (within the yearly limit) up to any amount in my account and still avoid probate as long as the account has a beneficiary or is owned by a trust. I definitely don’t want to subject the account to any court procedures or probate if I die so I’m trying to stay within the rules. I do not find TD’s explanation of the $100,000 rule to be clear at all and it doesn’t say any accounts are exempt.
Thank you for your site! It is the only place I’ve found to ask questions about this unnecessarily confusing topic.
Dunmovin says
Judy, I suggest you call them…a California person was told by TD that TD goes by state law and consequently in California it is over 166K. Check your state law and then contact them. And, I suggest you read really close the TD language see if it is talking about ALL assets OR only those that not covered by will or…. Good Luck…I’m sure Harry will have better info!
Harry Sit says
First of all, a TreasuryDirect *account* doesn’t have a beneficiary. The beneficiaries are set per holding in a personal account.
Next, the $100,000 threshold matters only when you let the bonds fall into a deceased owner’s estate. Bonds with a second owner or beneficiary who’s still living don’t go into the estate. So make sure you keep the second owner or beneficiary on the bonds up to date. See How to Add a Joint Owner or Change Beneficiary on I Bonds.
A trust doesn’t die. If the Account Manager of a trust account dies, the successor trustee takes over as the new Account Manager of the trust account. Make sure you keep the successor trustee up to date in your trust.
Brad says
First off, IANAL (I’m not a lawyer), but as Harry says, the beneficiary are what matters. If you have an individual account AND a trust account, the former of those will have a beneficiary, and the latter will not (it will just have a successor trustee when you pass away)–as Harry says. For the individual account (the former), generally a beneficiary means the assets pass directly to the beneficiary, and do not stay in the owner’s estate (**if and only if** you have designated a beneficiary–see Harry’s admonition to keep the beneficiary’s name up-to-date and in the name of a **living** beneficiary). I believe–though I am not sure, again IANAL–that your living trust could be made the beneficiary of your bonds (those that are held in your individual name)–not in your trust, but with your trust as beneficiary, so they’d pass into that trust vehicle and be under the control of the trust (now after your death, an irrevocable trust) and since they are in the trust and managed by your successor trustee, would not be subject to probate. Again, IANAL! 😉 If by some chance there is no living beneficiary and/or designating your trust as beneficiary was not allowed, then as Dunmovin mentions, if you live in California and you have no other assets not in your trust (such as a car, checking account, etc.) that add up to, with the bonds in your name, to over $166k or so (I think it’s adjusted by inflation/CPI occasionally), then Calif state could allow you to skip probate, if under that amount.
Harry Sit says
The beneficiary has to be a person. It can’t be a trust.
Dunmovin says
As a footnote to Brad’s excellent post that the California amount also applies to what treasury will allow for redemption w/o court intervention and I’m reminded that a business account does not have beneficiaries and thus one has to watch the total holdings and manner to get the funds out after death…see earlier posts for relevant treasury forms. Clear as mud
Judy B. says
Thank you all for your quick and informative replies! All IBonds I have now or will have in the future will be in my name with a beneficiary or be titled in the name of my trust so it appears either way they should stay out of my estate as long as my beneficiaries are up to date and living. I will still call TD to see what kind of response I get from them just to be on the safe side. Life should not be this complicated!
Thanks again.
Chris Kyrios says
Paper purchase question:
If your expected refund is less than $5K, and you want to buy $5k, is a way around this that you pay enough estimated taxes to ensure your refund will be at least $5k? Or can you designate the purchase of the $5k when filing & owe/include the difference if the refund would be under $5K. i.e. expected refund is $3k. I send in est tax prior to Jan 15th of $2.5k. Then when I file, I can send $5k for the iBond, and get a $500 refund.
Harry Sit says
If your refund is less than $5,000, your bond purchase will be limited to your refund rounded down to the nearest $50. If you want to buy $5,000, you need to pay enough estimated tax or make a payment with an extension to get your refund over $5,000. See Overpay Your Taxes to Buy I Bonds.
Jeff Somers says
You should be able to pay the IRS any amount you want as an additional estimated payment whenever you want. Just make sure you allow enough time for it to be credited to your account before your return is processed. I believe you can even establish and make a payment online. I would make sure it has posted before you file your return and be sure to indicate on your check that it is for 2021 1040 Tax Return and has your correct social security number on it if you send a check. I’m not sure how the system would handle an additional payment with your tax return when the return itself would show a refund. It might confuse it and think you are making an estimated payment for the 2022 tax year. Also, the address for sending a return with payment is due is different than the one for a return with a refund so the address for a refund may not be a bank lock box or set up to handle payments and that could delay things.
Dunmovin says
And I believe I read submitting a “request” for filing extension for tax return with $x could perhaps do it …it’s getting close to being late for final 2021 est tax submission . What says you Harry?
Chris says
Excluding any discussion of filing an extension, 1/18/2022, is the last date to make an estimated tax payment for 2021 through the IRS Direct payment site. I recently made another direct estimated taxes payment, to make sure I receive a $5k refund, from which I will purchase the additional $5k of I-Bonds.
Jeff Somers says
Dunmovin, Yes, if you are filing for an extension, anyway, you can always make an additional payment with that.
Jim says
Thanks for the helpful info!
1. I previously bought bonds with my wife as the other owner online. If I file taxes jointly with my spouse and buy I-bonds with the refund, I understand that the bonds would be named under both of us – so to then deposit them electronically into my account, could the bonds end up in this existing account where my wife is the other owner? Or because the tax refund bonds came from a “joint” tax return, then they have a special designation and the bonds would have to be registered in another category account?
2. For cashing out these joint tax return bonds in the future, can either me or my wife do that, or do both of us need to agree to cash out? I was not sure if there are special cashing out restrictions when the bonds are purchased through a joint tax return.
Thanks!
Harry Sit says
You can deposit them into an existing account. Either owner can cash out. See How To Deposit Paper I Bonds to TreasuryDirect Online Account.
Chris says
When I purchased I-bonds for both my wife and I, I then added my name as a second owner to the bonds purchased under her SS, and added her as the second owner of the bonds purchased under my SS.
Dunmovin says
Chris and others (so-inclined) should (re)read #93 above note about the conflicting provisions on limit of paper bond purchases…perhaps someone should make pitch in phone call to TD and report back?
Chris says
I don’t see a link to information on 93. I did find IRS disaster relief for the 10 affected counties in Kentucky, but I see no mention of I-Bonds. https://www.irs.gov/newsroom/for-kentucky-tornado-victims-irs-extends-2021-tax-filing-deadline-other-deadlines-to-may-16
Dunmovin says
Sorry I wasn’t clear…
The concept is …TD provides waivers and perhaps b/c of those “weather” waivers , a waiver for the 5k bond limit should be granted by TD when there are conflicting provisions on amount of paper bonds one can buy…
I copy here my earlier post
Dunmovin says
DECEMBER 28, 2021 AT 11:17 AM
Pan, reading the “news” from time to time on the TD website one currently sees…
“Fiscal Service Aids Savings Bonds Owners in Kentucky Affected by Severe Storms, Straight-line Winds, Flooding, and Tornadoes; One-year minimum holding period waived”
NOW…in addition to that possibly important news to some is the use of waivers…a big kicker is the $15K tax refund in Ibonds cited above…why don’t you email/write for a waiver of the flaw in the instructions in form 8888 so that one can comply/use the import of q/a also cited above AND say this will clear up any confusion, be conforming, i.e. not changing anything, and allow for Treasury to conform/coordinate all their documents in a proper rule promulgation process!!! TD’s interpretation should (also) control since it is the ibond issuing organization, not IRS! We only have one Treasury Department! Go for it! Harry, do you have a plan B?
janine s says
What is the minimum contribution amount to open/purchase a treasury ibond?
Harry Sit says
The minimum purchase is $25.
bws92082 says
I understand how the initial rate your purchase gets lasts for 6 months, but what happens in subsequent 6-month periods? Say you buy the bond in Feb 2022 and get the Nov 2021 rate. After 6 months, in Jul 2022, your rate changes to the latest May 2022 rate. So does this new rate remain in effect for you for another 6 months, etc? In other words, your 6-month rates will have a 3-month lag time to take effect from the official treasury rate change date?
Harry Sit says
That’s correct. You stay on every rate for six months.
TJ says
The I-bonds shows interest for one month added today for the first time since purchase. The bond was purchased on October 27, so it earned interest for Oct, Nov, Dec, & Jan. TreasuryDirect holds back the last 3 months of interest until the 5-year mark when there is no early redemption penalty.
The interest added today was $28 on $10,000 bond. I wonder why it isn’t $29.50 ($10,000 x 0.0354 / 12) ???
Harry Sit says
They have complicated rounding rules. Don’t look too closely from month to month. It will catch up next month.
Dave says
Thank you for a very helpful article. I bought an I-Bond before reading this and see that I made a mistake. I didn’t list my wife as the beneficiary so I went back and tried to do this by adding a new registration for a beneficiary. Then I tried to delete my original registration but was not allowed to delete it. So I designated the new registration as my preferred registration. Do you know if this will work? What does it mean to have more than one registration?
Chris says
You can name a person a co-owner. Wife is listed as co on mine and vice versa.
Harry Sit says
Making a registration your preferred registration only affects the default when you buy I Bonds again in the future. It doesn’t change the bonds you already bought. To do that, please follow the steps in How to Add a Joint Owner or Change Beneficiary on I Bonds.
Brad says
I’m not a CPA nor a tax attorney, but is it possible that if spouse is a beneficiary rather than a co-owner, that the basis for accumulated interest over a number of years would be stepped up—meaning no (ordinary income) tax owed on all the gains on that interest?
Curious if anyone knows the answer to this. If so, I’d rather have my bonds specify my spouse as beneficiary and hers specify me as beneficiary, in the event (hopefully unlikely) that one of us predeceases the other prior to us cashing these series I bonds, in order to save on taxes.
Harry Sit says
No step-up either way.
Lou Petrovsky says
My CPA informed me that the basis of U.S.Savings Bonds is not stepped up on the death of the owner unless the owner had elected during lifetime to report and be taxed on the interest.
Jeff Somers says
There is no such thing as a stepped up basis for interest earned on a U.S. savings bond. Stepped up basis is only for assets where there is going to be a capital gain/loss, e.g. stocks, bonds (not Savings Bonds which are like CDs for tax purposes). Do remember that if you buy a regular U.S. Treasury Bond or Note where the principal value fluctuates in the market, you would have a stepped up basis.
Gina says
This is an amazing article, very much appreciated. The TD site is horrible. Thank you very much. I do still have a few questions. I added a co-owner on the registration, but where do I see the I-bond’s registration after I’ve registered it? Can’t find it anywhere. Also, is there a tax implication if I change the co-owner? And what if I want to set up an account and don’t have a driver’s license or state ID? The site doesn’t have anywhere to input a passport. Thank you in advance.
Harry Sit says
To review the ownership registration of your current bonds, click on “Current Holdings” at the top, choose the Series I radio button, and submit. See the link in the reply to comment #115 if you need to make a change. No tax implication to change as long as you stay as the primary owner.
Leave the driver’s license or state ID field in the account opening application blank if you don’t have one.
Dunmovin says
Harry, a little help on completing 1040 and 8888 forms. Assume $5200 overpaid in taxes (line 34 of 1040SR form) and a joint return whereby at the end of the day we want to allocate $5000 for three paper I bond purchases (checking the box for line 35a since a 8888 will be attached) with $200 to be used/applied to 2022 est taxes (line 36). The first concern is I believe we do NOT enter any dollar amount in 35a…correct? But see below
Completing the 8888 form: line 4…$4800 to us; line 5a $100 with names of owner and co-owner in lines 5b 5c; line 5b $100 with other names/owner/co-owner on 6b 6c.
Line 7 is zero. Line 8 is the $5000 total bond purchases.
The other concern is I do not see anywhere where one is to state the refund amount is the $5000. Line 8 states “The total must equal the refund amount shown on your tax return”…But as noted above there is no place to put the refund on the tax return UNLESS Line 35a (of 1040 SR) should have $5000 entered into it??? (With the noted check box noted) But if we do that won’t that trigger a paper refund check to be issued?
Thank you!
Harry Sit says
Using your example:
Form 1040:
– Line 35a, box for Form 8888 checked, amount = $5,200
– Lind 35b/c/d blank (direct deposit info is on Form 8888)
Form 8888:
– Line 1a, $200 (leftover refund after bond purchase)
– Line 1b/c/d: bank account for the direct deposit
– Line 4: $4,800 I Bonds reserved for yourselves
– Line 5a, $100 I Bonds
– Line 5b: Name of recipient 1
– Line 5c: Co-owner or beneficiary of recipient 1 (check the box if this person is the beneficiary of recipient 1)
– Line 6a, $100 I Bonds
– Line 6b: Name of recipient 2
– Line 6c: Co-owner or beneficiary of recipient 2 (check the box if this person is the beneficiary of recipient 2)
– Line 8: $5,200
Harry Sit says
Sorry, I just noticed you want the residual $200 applied to the next year. Make adjustments accordingly. Basically line 35a gives the total refund amount. Form 8888 breaks it down into specific modes of refund: direct deposit, check, and I Bonds.
Dunmovin says
Thanks, Harry let me fine tune what I’m reading sorry for my earlier confusion: $5200 over withheld on taxes. If one does not want any refund in dollars but to have $200 retained for 2022 est. taxes with $5000 used to purchase paper ibonds:
1040
Line 35a will have the box checked AND $5000 is entered in the box to the right? Right?
Line 36 will reflect the $200 entry for 2022 est taxes? Right?
8888
Part I is left entirely blank (No checks or direct deposit of refund).
Line 8 will be $5000 (total of the ibonds)…same entry as for line 35a on 1040? Right?
thank you very much
Harry Sit says
That’s correct.
Marion Julius Nesmith, Jr. says
Can you pull more money from a traditional ira ..with hold more tax and use that as your tax payment to make your i bond purchase
Dunmovin says
Of course the withdrawal rules for the IRA trustee need to be considered but generally they allow RMDs with no ewp . I do it at end of year and see what my tax liability may be and (last year) had $5k extra withheld for fed taxes to use for ibond purchase this month with return filing refund and 8888 submission. If done now it would be for 2022 taxes…I would not do it now but in December
Jeff Somers says
Any withheld taxes on your 2022 withdrawal would be for your 2022 tax year and would not be available to purchase I bonds until you file your 2022 tax return next year. Of course, you could use the withdrawn money and pay an extra estimated payment now for 2021 taxes; the IRS will always take your money. Just make sure you designate it as a 2021 payment. If you do that, you will already be set up to make I bond purchases for 2021 and 2022 with your tax refund.
Dunmovin says
Too late for paying estimated taxes for 2021
Jeff Somers says
No, it is not. The IRS will take your money at any time. Just be sure to designate it for 2021 Tax Year.
Jeff Somers says
Dunmovin, Just to clarify further. The estimated payment deadlines are to avoid any penalty due for paying too little estimated tax in a timely manner. They are not deadlines for making payments on your tax account. You can make payments any time you want; just make sure to designate the correct tax year and include your name, address and social security number.
Dunmovin says
Jeff, what irs tax form is/would that/any 2021 tax payment made in February 2022 reflected in/on? See line 25 to 1040-SR for 2021 returns
Lou Petrovsky says
It’s Form 1040-ES, and it’s Voucher #4, even though the payment is being made later than its due date of 1/18/22. The amount is entered on Line 26 of Form 1040 SR, rather than Line 25.
Jeff Somers says
Yes, you can do as Lou suggests above but payments can be sent to the IRS without a voucher as long as you include all of the necessary information on your check including, Name, address, social security number AND the Tax Year to which your payment applies, e.g. 2021 Form 1040 Payment. If you have or can print a 2021 Tax Voucher, you can go ahead and use it and it doesn’t matter which number voucher you use, but always include the information on the check as well because the IRS is famous for losing/separating documents including vouchers that come with payments.
Harry Sit says
Skip the check and the voucher. Make an extension payment online. It’ll be credited to your account sooner and for the correct year. You also get extra time to file your tax return (but you don’t have to use the extra time when you don’t need it). See Overpay Your Taxes to Buy $5,000 of I Bonds.
Gina says
Just read that if the registration is “or” then the grantee has the tax liability, but if it’s “with” then the primary owner has the tax liability. Didn’t see an option for “or”. What is the difference between the registrations?
Harry Sit says
You get “or” only on paper bonds and you keep the “or” registration when you deposit those paper bonds to your online account. You only get “with” when you buy in the online account. The two owners in the “or” registration are equal. The primary owner in the “with” registration can kick out or replace the second owner at will without notice or consent.
Dunmovin says
Soooo , that’s why she listed me second…got it! Have a super weekend
Gina says
If I have secondary owner transaction rights on an I-bond, and the primary owner dies, is there something that has to be done? Can I just leave it as is if I don’t want to redeem?
Or do I have to reregister it, somehow?
Thanks in advance.
Harry Sit says
You should notify TreasuryDirect and take over the bonds proactively. You can’t designate your own beneficiary or second owner until you become the primary owner.
bws92082 says
OK, so you can buy I-bonds in our revocable living trust. What happens when you have previously purchased a bond for your minor dependent child, in which you (not your trust) are the “custodian” and in which you have designated yourself (not your trust) as the beneficiary. Does TD allow you to convert all this to your trust?
Harry Sit says
The child is the owner of the bond. I assume the child isn’t a grantor of your trust. You can’t put someone else’s assets into your trust.
bws92082 says
OK, so if I die (as custodian), who becomes the new custodian? (Does custodianship transfer to the new legal guardian of the child?)
And if I die (as beneficiary) and my child also dies, who becomes the bond’s beneficiary?
Harry Sit says
I suppose the legal guardian or the successor custodian you name in your will. Please Google “UTMA account death of custodian” and check with TreasuryDirect customer service. The owner’s estate is the catch-all when all named registrants die.
Pan Tangible says
TaxSlayer program totally messed up my plans. Since I chose “send me a paper check” instead of “direct deposit” (with no warning that that choice would foreclose my options), I “clicked on through” as directed and it was filed! No opportunity to ask for IBONDS!!!
I’m furious.
Are there any recommended Tax Programs that won’t stumble over 8888? This is the second year this has happened.
Harry Sit says
I have detailed steps with screenshots for TurboTax and H&R Block software in Overpay Your Taxes to Buy $5,000 in I Bonds.
Dunmovin says
I always figure my own taxes and send by US Mail with 8888. Mailed mine last Thursday by registered mail
Dunmovin says
Update on #129…got tracking info today…delivered “to a P.O. Box,” yet no P.O. Box in / on address label AND no P.O. Box number in tracking info…only what irs provides! Go figure! Will read the riot act tomorrow to local post office
Dunmovin says
Further update to #129 below…went to PO and on their receipt screen for tracking number they had an address name and signature and got a picture of it
Pan Tangible says
I had to do that last year, but am concerned May deadline is coming up fast, so I thought efile would move it along. I’ll never use TaxSlayer again.
Now I’ll either have to lose the Tax Refund Bonds for 2021, or file an Amended which will slow down the refund even more! So screwed.
Dunmovin says
Suggestion. I rarely correctly fill out eforms if I can’t first see/read the entire blank form first, ie there may be question(s) that persuade me to go another way. I have never efiled with irs but have used/entered sample inputs on commercial e tax forms to check calculations. Sooooo try sample data first!
Mihir says
Thanks for the great article. Just so I understand this “fixed rate never changes” part.. say I had an I-Bond that was issued to me in Nov 2007 when fixed rate was 1.2%. Does this mean that on my next 6-month renewal in April 2022 I will get 1.2 (fixed) + 7.12 (composite) = 8.32% interest?
Harry Sit says
The November 2007 bonds are already earning 8.36% now.
Coriander says
Harry, can you shed any light on how the fixed-rate component of I bonds is set? I know it’s been at zero for quite a while, but I’m wondering if that might change with the anticipated upcoming increases in the fed funds rate. The only “explanation” I’ve been able to find is that it’s a complicated formula. Thanks!
Harry Sit says
There’s no formula. A person or a committee at the Treasury Department sets it at their discretion. You can study what happened in the last cycle. The Fed started raising interest rates in late 2015. The fixed rate on I Bonds stayed at 0% and 0.1% until May 2018. The yield on 5-year TIPS was +0.7% when the fixed rate on I Bonds went from 0.1% to 0.3%. The yield on 5-year TIPS is -1.0% today. We have a long way to go before we’ll see a meaningful positive fixed rate on I Bonds.
Dunmovin says
From someone’s post on another blog I saw…
“The Rauh and Warsh article in today’s WSJ advocates Treasury immediately raise individual ibond purchase limit to $100k. And states, “Over the past three months alone, I-bond purchases soared to $7.1 billion, compared with an average of $700 million a year during the decade before.” FIs are losing $s and should immediately raise CD rates OR will they advocate “Treasury stop this carnage and lower the limit!””
Jeff Somers says
The comment you posted from another blog is confusing. If I-bond purchases have soared, why would that be a reason to advocate an increase in the limit? That would seem to be an incentive to lower the limit as either you or the article or the other poster said the FIs might advocate. Personally, yes I would like to see a higher limit, but why would the government want to commit to these higher rates when it can borrow so much cheaper in the regular government bond market? One can even buy EE bonds at their pitiful interest rate but if they are put away for 20 years, one doubles his/her money, thereby locking in a compound rate a bit under 5% for that period. That’s still a lot better than what 20 year government bonds are paying right now if one wants a locked in rate. Of course, the I-bond currently pay higher but the rate is only guaranteed 6 months at a time. Then again, the I-bond only has to be held 5 years to avoid any penalty (and if the rate drops real low, even the 3 month penalty is not much to worry about) whereas, I must emphasize to any readers that you only get the double value deal if EE bonds are held the full 20 years.
Dunmovin says
Have you read the original WSJ source material? I don’t speak for the authors…. but the article makes sense to me as well as the post on another blog. Re-write if you are so inclined. Good Luck
Lou Petrovsky says
From the perspective of the Federal Reserve, their focus right now is not the issue of interest costs but the bigger-picture issue of significantly reducing inflation. Substantially increasing the annual purchase limit on I-Bonds may be helpful in achieving that goal as a very large increase in bond sales to enough purchasers may significantly reduce the huge current oversupply of money in a short time period. Yes, the current I-Bond rate is very high, but (1) if a large increase in the I-Bond purchase limit achieves that goal of reducing inflation quickly enough, the Treasury always has the option of bringing down the cap and mitigating the interest cost to the country, or even scrapping the entire program going forward, and (2) from a purchaser’s perspective, although nothing in the U.S. fixed income market currently offers such a high rate, the current I-Bond rate includes a zero fixed rate component, so it is not a return on principal invested, but partial protection of that principal (only partial, because at some point income tax will be due, except for those who apply their redemption proceeds to qualified education costs).
Howard says
Can I form an unlimited number of living trusts and purchase $10,000 of Ibonds in each one?
If so can I use the same Social Security number or tax ID number for each trust?
Thanks!
Howard
Jacquie Traub says
See replies to the first comment of this very informative article by Harry Sit
https://thefinancebuff.com/simple-living-trust-software-i-bonds.html
Andy says
Can a non-profit 501(c)3 buy I Bonds? If so, what option do we choose, corporation, LLC
Harry Sit says
A non-profit can buy $10,000 a year as a corporation.
bws92082 says
Hi Harry,
In your comment above from SEPTEMBER 22, 2021 AT 6:07 PM, you mentioned “the fixed rate…won’t go up until the 5-year TIPS yield turns positive (currently -1.6%).”
According to the link below, as of April 11, 2022, the fixed rate has shot up one percent in the last month to -0.58%. At this rate, it could go positive by May 1. Do you know when the fixed rate will be announced (or estimated with some level of certainty)?
https://fred.stlouisfed.org/series/DFII5
Harry Sit says
The fixed rate will be announced on May 2. I expect it to stay at zero.
George says
Hello,
Thank you Harry for this very helpful site. I have some questions regarding beneficiaries:
Can a beneficiary be under 18? If so, would they need to have an account with TD or can the account be created in the event of my death so the transfer can happen at that point?
I am thinking of opening a TD account and get the 10K for this year and wanted to list my nephew, who is under 18, as the beneficiary (I am single, no kids).
Thank you,
George
Harry Sit says
I don’t see any restrictions on the age of the beneficiary. Please confirm with customer service (see contact form, email, and phone number in the “Customer Service” section). The beneficiary doesn’t need to have a TreasuryDirect account at the time you designate the beneficiary.
Old mariner says
I have beneficiaries on some of my bonds who are under the age of 18, and none of them have a Treasury Direct account. When I set up the bond registration, only two things were asked: their name and SSN. There were no questions about age, date of birth, address, or phone number.
Scott says
Is there some kind of 3 month delay in earning interest on I Bonds? I bought $10,000 4 months ago and according to Treasury Direct I have only earned $60 at inflation APR of 7.12%. I bought $10,000 3 months ago and have earned nothing according to Treasury Direct. I know there is an initial 3 month no-earning-period on EE bonds but everything I’ve read says that I Bonds start earning on the first day. I’m confused.
Harry Sit says
The 3-month lag is already mentioned in the “Check Balance” section in this post.
Scott says
Yep, and I actually noticed that 5 minutes after I posted my question – story of my life. Sorry to bother you.
E.R. says
If I sell stuff on eBay, I can call that a sole proprietorship (SP). And so in theory I can have multipole SPs.
Does this mean I can buy up to $10K of I-bonds for each of my SPs, in additional to $10K for my personal account?
If I just use my SSN as EIN for all SPs, how does treasure direct keep track of the $10K limit?
Harry Sit says
The multiple sole proprietorships can’t just exist in your head. If you’d like to pursue it, make them formal and ongoing endeavors. See Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp.
E.R. says
“An LLC or a sole proprietorship can have an EIN or it can use the owner’s Social Security Number as its tax ID. Which tax ID a business uses and how the business is taxed don’t change the fact the business is still a separate entity from the owner as a person.”
To sum up, for I-bond buying purposes, you can have a sole proprietorship **BUT** it has to be registered with its own EIN (not your SSN). Yes?
Harry Sit says
No, the sole proprietorship can use the owner’s SSN but it has to be a real sole proprietorship, not just a figment of imagination. See the IRS guidelines on business activities.
Jim S says
My spouse and I have set up our I Bond accounts as primary owner with second owners. (DH with DW and DW with DH). According to the TD FAQ: Upon the death of either the primary or secondary owner, the survivor will be considered the sole owner of the bond.
Is this considered a transfer of ownership? Will tax have to be paid on the accumulated interest? Will TD issue a 1099 at the end of the year?
Thanks, Jim S
Harry Sit says
By default whoever inherits the I Bonds will pay tax on all accumulated interest since the beginning when they eventually cash out. No 1099 will be issued in the year of the death of the original owner. You can do it differently but it gets complicated. See Taxes on I Bonds Get Complicated If You Go Against the Default.
Dunmovin says
Why push the envelope and kill the “golden goose?” I don’t disagree with Harry’s answer…but it use to be that a tax deferred retirement account required a TIN. I have had one for years…especially for overseas income/transfer to the states…does one think that it and other indices are supportive of an independent business? And for a mere $10k…really?
Martin…how are the deliveries working?
Bob C says
Sorry if this has already been asked, I set up a TD account and purchased 10k with me as primary and wife as secondary. She got flagged opening her account and has to do the verification thing, question is can I buy for her in my account as gift then transfer to her once she gets her account up and running? Wanting to purchase by end of April, Thanks for the informative blog.
Harry Sit says
Yes, buying a gift before the recipient sets up their account works. She can add you as a second owner after you deliver the gift. See reply to comment #102.
Marion Julius Nesmith, Jr. says
Good morning,
I purchased my bonds on December 4, 2021 and Jan. 8, 2022.
When will they qualify for the new interest rate?
Thanks,
Marion
Harry Sit says
In June and July respectively. Every bond stays on a rate for full six months before moving on to the next rate for another six months.
Ben says
Hi.
Thanks for the informative article! I found it quite helpful.
My mom wants to buy I bonds but she isn’t computer or tech saavy at all. She can barely speak English. As a result, she’s asked me to create an account in my name. Or to have the account in her name. Of course, then the email addresses and phone numbers don’t line up because the latter two will be mine. I don’t even know if this is possible legally.
I did read about the tax implications on TresuryDirect.gov. It says that I can name someone else as an owner of the bonds, and they receive all the tax implications. Yet, reading your website, it seems that that person needs to be a spouse, not a parent. Do you know if I would be able to be the primary account owner, but with my mother as the person who would hold the bonds and receive the 1099-INT?
Thanks.
Old mariner says
Well, here are my thoughts. Two people can be owners of a bond. Those two people don’t have to be related to each other. I used to own a bond with my mother. But, if an electronic bond is purchased under your account, then you are considered the primary owner. If a bond is cashed in from your account, you are the one who will receive the 1099-INT. You don’t get a 1099-INT every year. You only get one when you cash in the bond or the bond registration (ownership) changes.
In the above scenario, if she is co-owner and wants to cash in the bond, you can cash it for her, you will receive the proceeds into your bank account, and you will receive the 1099-INT. However, you can claim nominee status with the IRS effectively passing the tax liability for the interest over to her. It’s an easy process to do that and involves you issuing a 1099-INT to your Mom. That’s something for you to Google, if you’d like to learn about it.
It’s also pretty easy to set up the TD account in your mother’s name. I don’t think it matters if you share a phone number, but it’s probably better to have her own email address. It’s easy to open a Gmail, Yahoo, or other provider email account for her. It’ll all be in her name, but you’ll be the one managing it for her. If she wants, she can elect to name you the second owner or as her beneficiary. If she wants to cash in the bond, you can do it for her, she will receive the proceeds into her bank account, and she will receive the 1099-INT.
Lou Petrovsky says
If you are referring to their toll free number 844-284-2676, when I called that number this morning there was no such prerecorded message. On their Option 3 (“status of correspondence”) there is prerecorded message that it can take up to 8 weeks to respond to requests for status of correspondence. Is there a different phone number that includes the message you heard?
Dunmovin says
Martin, can you update us on delivery status? Thanks
Old mariner says
Who’s Martin? I can find no Martin in the thread.
Harry Sit says
Martin is on the post about gifts, not this one. He said the gifts were delivered successfully.
Dunmovin says
Sorry about my mispost…but briefly Martin on another thread was planning to “deliver” $30K of gifts to one individual and, as Harry stated, I found Martin’s post and the $30K gift was delivered to one person…Or so says Martin. Given there is some form of post sale “audit” by TD it could remain to see about “what happens….” But
Harry any comments on (apparently) more than $30K being delivered to one person in one year?
Harry Sit says
Let’s keep the discussion on the gift post. I’m not surprised. See my comments on April 16th there.
Frank says
Confirmed, Treasury will pay out 9.62% interest rate for the next 6 months.
https://www.cnbc.com/2022/05/02/i-bonds-to-deliver-a-record-9point62percent-interest-for-the-next-six-months.html
Leonard says
Im thinking of buying 10k in my account for 2022 with my wife as pod. Then buying another 10k in 2022 as a gift to my wife but leaving the gift in the gift box until 2023 at which time I will transfer the gift to my wife’s account.. Then my wife will buy 10k in her account in 2022 with me as pod. She will also buy another 10k as a gift to me and leave the bond in her gift box until 2023 and then transfer the gift to me.. Will this strategy violate the 10k yearly limit per person?
Harry Sit says
That works. Be careful when you buy the gift. Many people make a mistake and end up buying double for themselves. See the “Avoid Mistakes” section in the post on gifts.
Pan says
I hope this isn’t a dumb question, but do the earnings from I Bonds ‘compound’?
I ask because it occurred to me that they reflect an increase in Inflation, not an interest rate.
Thank you
Harry Sit says
They compound every six months.
Matt says
My mom has her bank accounts in a living trust, where she’s the trustee and grantor. Can she use this to fund her I-Bond purchase in her individual account?
Harry Sit says
She can use the bank account in the name of her trust to buy I Bonds in her individual account.
Dunmovin says
Matt, why not buy for a trust entity? And for herself as in individual account?
Matt says
My mother is a strange person & I try not to get too involved, but she is getting older now. It seems she did the reverse of most people – she already bought for her trust account. It seems she never realized you can also have an individual account at Treasury Direct. 😐
Dunmovin says
I initially used a separate checking account for TD business account but later changed it to another checking account that is used for other TD accounts but all four use the same last name (only) for TD bank registration…the latter in my view is important. Harry?
Harry Sit says
If you already changed it and it’s working, what’s the problem?
Brad says
Btw Matt, if your mother’s trust is for probate avoidance purposes, any bonds owned in her individual name rather than trust may need to go through probate when she dies—most states now have an exemption amount, but you might want to check that her individual purchases (particularly that are over multiple years) don’t add up to more than the limit to avoid probate, though the process to probate some savings bonds might not be too onerous, it could negate (via probate fees) any gain in interest rates she gets via the Series I bonds… a consideration anyway.
Old mariner says
Probate can be avoided by designating a second owner or a beneficiary on the bond. Neither of those can be the Trust, however.
Brad says
Oh true. One cannot have a beneficiary or second owner for a trust account, but one can of course on an individual account. So as long as that accords with her wishes, that works! Thanks Old Mariner.
Matt says
Thank you Harry. I’m really happy I stumbled onto your site a few weeks back. Keep up the great work.
Peter says
When redeeming a portion of your I bond after 1 year, can you just withdraw accrued interest without touching the principal and not be penalized by losing the previous three months interest?
Harry Sit says
No. All withdrawals will be proportional with both principal and interest, and subject to the early withdrawal penalty in the first five years.
Matt says
Harry – Is there a practical reason for my wife to open her own TreasuryDirect account if she doesn’t care about managing it? Can I just simply add a new registration under my own account where she is the primary and I am the secondary or beneficiary? Any issues with this? Thanks as always.
Harry Sit says
You’ll see it doesn’t work after you try it that way. The registration with her as the primary in your account will have to be marked as a gift. You can’t cash out a gift for her in your account. The gift will be in limbo until she opens her own account to receive the gift.
Matt says
Alright – got it. Thank you again for all your help.
Mike C says
Thank you! I had been apprehensive up until now to set up a DirectTreasurey account. Your post made the process successful without any glitches.
Gaylene Vitale says
I wish to check the beneficiary for my account. I cannot remember the answer to the security question they posed. What can I do?
Thank you, Great website and answer
Gaylene
Harry Sit says
You see the beneficiary on your bonds when you click on “Current Holdings” in the top menu. It doesn’t ask the security question. The holdings are grouped by “registration.” When it shows “Your Name POD Beneficiary Name” you know who’s the beneficiary on those bonds.
Not knowing the answer to the security questions will eventually block you from certain actions. You set three security questions when you opened the account. Go to ManageDirect and then “View/Change my security questions.” Hopefully you’ll be asked a different security question and you still remember the answer to that one. You will then see the answers to all three security questions. This time write those down and save them in a safe place.
Leighton says
Re the penalty of last 3 months of INTEREST: I read on another site that the penalty is for the interest portion only (which is 0 now), and NOT the inflation portion (which is the big part). Is that true? If so, there is essentially no penalty now. Thanks.
Harry Sit says
Not true.
Lou Petrovsky says
No. Interest is a composite of the fixed and inflation components. The penalty is not only on the fixed component. An argument can be made that the inflation component is not true (economic) interest in the sense that it protects your principal, but it is still Interest for the purposes of the rules, including the tax rules, which require all interest to be reported either annually or upon redemption, without regard to the two components. Inflation protection is therefore reduced by the taxes. When calculating the values of savings bonds held for less than 5 years, the TD calculator subtracts composite interest for the final three months of ownership when computing the values of bonds, so you can prove that for yourself.
wallies says
Has anyone successfully withdrawn their ibonds using TreasuryDirect? The customer service is nearly non-existent. I opened a new account and sent in the authorization form. Days after mailing this form, I received several suspicious phishing texts with information from the form. I waited two hours to speak to a clueless representative who asked went overboard with personal questions to “confirm my identity” before he basically told me he couldn’t find my authorization form even though it was mailed several weeks ago and to call back next week. I emailed my concerns and received an automativc reply that stated “Due to the large volume of e-mails we currently are receiving, we are temporarily limiting our communication by e-mail.” TreasuryDirect gets TERRIBLE online reviews and many people are unable to get their money after MONTHS of waiting. Before promoting what a great investment ibonds are, I believe you need to be frank and honest about the rabbit hole many investors will be getting themselves into. It’s not worth it to have your identity stolen and your money in limbo.
Harry Sit says
I cashed out I Bonds before using the online interface shown in the “Cash Out (Redeem)” section. The money showed up in my bank account the next business day. I mailed in a form to change the bank account in December. I received no phishing texts. If many people are unable to get their money after months of waiting, they must have a more complicated case than simply logging in and cashing out (lost account number, forgot password, can’t answer the security question, closed bank account, …).
Leighton says
This is exactly what my wife and I are concerned about – any deviation from the narrow norm: the person opening the account, being the one to withdraw electronically to the same funding account.
This is especially of concern for my beneficiary (wife) on my death, and even more so with my T.D. trust account, which doesn’t list the beneficiary. (It’s on the trust document, which requires sending in paperwork. What could go wrong there?) She is not as proficient at figuring things out, and not as much of a bulldog, as I am, to see it through (complaining to my Congressman/Senator, etc). “Who ya gonna call?”
Example: A month ago, my wife made a mistake in trying to gift me $10K (trying to do it from HER registration). T.D. notified her that she exceeded HER $10K for the year, but were taking her money anyway, and would return it in 8 – 10 WEEKS. So, we’re wondering if they will ever return it.
By the way, T.D. has been “unavailable” for opening a new account for the past 2 days now, that I know of (maybe longer). One goes through all the entries before they give that message. You can log into an existing account though.
Another example of big gov’t problems: The IRS had no record of my paper return over a year after cashing the payment check I sent. Therefore, I couldn’t e-file the following year, since they couldn’t confirm my AGI online from that previous paper return. Same next year. Endless cycle. (My Senator’s office discovered the solution is to enter 0 as my AGI, then I could e-file).
Harry Sit says
Some ways to mitigate your concerns:
– Document your account numbers.
– Cash out before you die. Most deaths don’t happen in an instant.
– Grant your beneficiary View rights on the bonds in your personal account.
– Name someone proficient as your executor and successor trustee. Someone needs to send in your death certificate to kick off the process to transfer your bonds to the beneficiary. The successor trustee needs to take over the trust account.
wallies says
Warning! TreasuryDirect is now playing a recording on their phone line that states it may take up to 13 WEEKS for them to process incoming paperwork. That’s over 3 months of lost interest!
Harry Sit says
To be clear, most people don’t need to submit any paperwork. They open the account online and they buy I Bonds in minutes. Cashing out I Bonds doesn’t require paperwork either. Most pieces of paperwork submitted don’t involve lost interest. For example, when you deposit paper bonds to your online account, your paper bonds continue to earn interest in the meantime.
wallies says
Harry, if you have any idea how to expedite this process, I’m all ears. TD is making me submit another FS Form 5444 for my trust account, even though it’s the exact same information as my personal account, which was opened last year. I mailed the form over six weeks ago. TD has yet to unlock my trust account so I can deposit money. I’ve already lost a month’s interest. Every time I call it’s a two-hour hold.
Harry Sit says
They don’t necessarily notify you when they unlock your account. Some people just see they have full access when they log in after about a month.
Old mariner says
@wallies — Try calling right at 8:00 am ET when the TD call center opens. The wait time might be shorter. Maybe even start the call at 7:59 am. Unfortunately, I’m not sure the call center can really tell you anything if the paperwork for your Trust hasn’t been processed. A six-week or more delay is pathetic.
Leighton says
Regarding your question: “TD is making me submit another FS Form 5444 for my trust account, even though it’s the exact same information as my personal account, which was opened last year.”
In short: If you saved the trust registration, look at that and your personal registration side by side for any slight differences. If you find one, just abandon the first account, and start over opening a new account for that trust.
Elaboration: Not sure if your question is similar to the problem we had opening a trust account, but here goes. They gave us an account number, but couldn’t “confirm” something on the registration (not giving us a clue what it is, of course). They said they needed a form signed by the bank confirming identity.
I looked at the attempted registration side by side with the PERSONAL account which we opened a month ago with no problem. I noticed a slight variation in our address, which apparently didn’t line up with USPS.
So, since no money could be deposited yet in that problem trust account, we just abandoned it, and tried again to open an account for that trust, everything the same, except with that slight address correction, and it went through OK. You might try that.
Old mariner says
To Leighton says on JUNE 7, 2022 AT 12:52 PM,
That’s brilliant!
wallies says
The authorization form for my trust account was mailed May 11 and my account was unlocked June 14 – a two month wait time! The account needed to be verified DESPITE the fact that the trust account has the exact same address as my personal account, which was verified last year. Now I’m afraid to put more money in these accounts. If I have anything more than a simple automatic transaction it will take months to get my money.
Lizzie says
Harry – Do you know if non-profits can buy i bonds?
Harry Sit says
See comment #137.
Vincent Hodgdon says
With current economic situation are I bonds still a save investment.
Harry Sit says
Vincent – Both the principal and the interest are guaranteed by the U.S. government. You earn enough interest to at least match inflation. I Bonds are a safe investment in any economic environment.
John Endicott says
Vincent. since they’re backed by the US government and designed to match inflation, they’re as safe an investment as you are ever likely to find in most any economic environment. The only environment in which they wouldn’t be safe is the collapse of the US economic system, but in that environment, pretty much none of your other investments (which are almost all tied to the US economic system in some form or other) would not be safe either.
John Endicott says
Oops, accidentally added a extra negative in that last sentence. But you all know what I meant these (I hope).
Matt says
Afternoon Harry – Can you just redeem just the interest portion of your I-Bond or are all redemptions made up of principal + interest? Thank you.
Harry Sit says
No, all redemptions are prorated between principal and interest.
Lizzie says
How do you close/ delete an account at TreasuryDirect?
Harry Sit says
An empty account will be automatically closed after some time (18 months?). If you’d like to close it sooner, contact customer service, although they’re quite busy these days.
Lizzie says
Thank you Harry. Two more questions- do you know how the Automatic Payroll Savings Deduction program with TreasuryDirect works? Are my contributions from my paycheck before or after tax? I can’t seem to find any information anywhere on this & the HR dept is no help.
Harry Sit says
The payroll contributions are after tax.
Lizzie says
Thanks!
Lizzie says
Harry: Which articles would you recommend for someone that is new to TIPS? Thanks a lot for all your knowledge.
Harry Sit says
This one: More Inflation Protection with TIPS After Maxing Out I Bonds.
Howard says
If you look at all the Tip Etf’s, they are Trading at or near new lows!!
So when should they be bought?
Harry Sit says
Let’s keep comments on TIPS on the TIPS post and leave this post only for I Bonds. That said, at or near new lows is usually a great time to buy.
cathy says
Harry,
Is there any way to link trust account with individual account? I just pulled up my individual account and had a moment of panic since I forgot I had to set up a separate account for the trust.
Harry Sit says
No, you can’t link them. You can use a spreadsheet to list all your accounts and the approximate values. Put it in your “Where’s My Money” document.
bws92082 says
I’ve heard the 12-month minimum hold time before selling is not true. Supposedly, depending on what day of the month you bought, you can sell in as little as 11 months plus one day. It’s 12 monthly interest payments that must pass, not 12 months. Can you confirm?
Harry Sit says
12 months from the issuing date, which is listed on your bonds.
Tom says
I have a personal treasury direct account with $100,000 in ibonds that I want to put into my family trust. Can I transfer it to the trust account?
tom says
The family trust has its own treasury direct account which already has ibonds in it.
Harry Sit says
Log in to your personal account, go to ManageDirect, and then “Transfer securities.” If the online process asks you to fill out a paper form FS 5511, you follow the instructions on that form. Because a transfer counts toward the annual purchase limit of the receiving account, do it in a year when you’re not buying new bonds in the trust account.
Truman says
Wouldn’t it be great if the I bond purchase limit increases periodically?
You know, because of inflation. 🙂
That’s why contribution limits on retirement accounts go up every few years, and tax bracket cutoffs also rise slowly.
Dunmovin says
Truman, you mean “have the purchase limits returned to old levels”. It would also reduce the TD workload but would not get the paper bonds issued as a result of filing paper returns…why would TD management want to save taxpayers $s by not paying late payment interest. Here it is July and paper returns have not been processed yet…they were filed in February! Don’t drink too much on the fourth or the fifth may not come forth!
Ralph says
I filed on 4/15. Received the paper bond, sent it in and the acknowledged receipt. Still waiting to see it in my online TD account.
Dunmovin says
Thanks, Ralph but problem is for those that paper filed 1040/8888s
Xina Uhl says
I’m not a person who knows how to earn money on investments, but even I could follow the very helpful steps you provided. Thank you so much! I also invested money for my mother in law who had been putting it in a CD with its minuscule return. So you helped two people!
olisdad says
Question, i finally got the bank to put their stamp on the Treasury verification form for my wifes account that was flagged, should i just mail it first class or should i send it with delivery confirmation to the po box indicated? This whole process seems pretty tedious.
Harry Sit says
First class.
TomH says
You have cautioned people about waiting too long when buying I-bonds at the end of a month, so as not to lose retroactive interest. On the flip side, should redemptions be deferred until the beginning of a month, so as not to lose the interest for the preceding month?
Harry Sit says
Yes, or accelerated when holding to the 20th doesn’t earn any more interest once you pass the beginning of the month.
TomH says
I’m not sure what happens on the 20th. I thought that you had to own the bond for the whole month to get any interest for that month (except for the first month). So if you need the money by the end of the month, you may as well redeem as soon as the previous month’s interest is credited, but if you don’t need it by the end of the month, you may as well wait to redeem until early in the next month. Isn’t that right?
Harry Sit says
That’s correct. The 20th was just an example. If you’re planning to redeem on the 20th to pay a bill and you can’t wait until the next month, you might as well redeem on the 2nd or the 5th of this month.
TomH says
Is this correct?
Monthly interest earned on a Series I Savings Bond is credited to your bond on the first of the following month, but only when it is yours for eventual redemption. There is a 3-month interest penalty for redemptions in the first 5 years. So, the first 3 months of interest following a bond purchase will not be posted. The fourth month’s interest will be earned but will replace the first month’s interest as a potential forfeiture. The first month’s interest will then be posted at the start of the fifth month. The second month’s interest is posted to start the sixth month, etc.
Harry Sit says
That’s correct. You get four months of interest at the 5-year mark.
Marion Julius Nesmith, Jr. says
Good morning,
I just tried to sign in and they asked for a taxpayer id.
Never been asked this
i used my SS#
and now I’m locked out
I’m on a 1.45 hr hold
any help
Howard says
Hello
I have a sole proprietorship and a personal iBond account. If I overpay my taxes by $10,000 can each of these accounts purchase an additional $5000 of I bonds?
Thanks!
Jeff says
No. You only have one tax return and the purchase limit applies to the tax return.
Howard says
👍Thanks!
Leighton says
Good news update for those who, like us, also goofed up and bought more than the $10k yearly limit and got the message that TD would return the money in 10-12 weeks. Don’t worry.
Apparently, TD is going to let us slide by, NOT return the $10k, and let us keep the investment. Today they paid the 1st month (May) of interest ($80) on that additional $10k we erroneously bought on 5/12/2022. (Remember, we purchasers are always behind 3 months on interest, until the 5 year holding period is up.)
Brad says
If this is true, why not buy as much as one wants, I suppose it would have to be in $10k increments, or they will reject outright. Technically one can do this **within the rules they set** by creating multiple–as many as you want!–living (revocable) trusts, each with a different name, and using the same SS # for each which is perfectly acceptable to them. Perhaps they are fine if one does this, too (within their rules)?
Harry Sit says
Despite the technology I deploy to block spam, sometimes a spam comment still comes through. It isn’t feasible to review and approve every comment manually before sending the email notifications. If you see spam comments in the email notifications, please ignore them.
Flingo says
Harry,
Thanks for all your insights. I forward your links to anyone who is considering ibonds. The following should be an easy one, but I am stuck; I can’t back into Treasury’s interest rate calcs, eg,
Bought $100 ibond: 9/2021
Redeem ibond: 9/2022
ibond interest rate 9/2021-2/2022: 1.77%
ibond interest rate 3/2021-8/2022: 3.56%
My calc:
$100*1.0177=$101.77 plus
$101.77*(1+(0.0356/2)=$103.5813 (interest cut in half to reflect 3 month penalty)
My calc 1 interest on $100: $3.58
Treasury-calculated interest on $100: $3.56
What am I missing?
Joe says
First The rate u are using is incorrect Second. What number are you looking for?
Harry Sit says
You’re missing rounding and that $3.58 and $3.56 are close enough. Treasury’s calculation method is published in the federal regulations. It may not be what you expect but the prescribed method consistently applies to everyone. You can trust that Treasury’s computers are programmed correctly to the federal regulations and no one is being cheated. If you really care to know, look up 31 CFR 359.19 and 31 CFR 359.39.
Flingo says
Thanks Harry. I did not think I had caught an error, I just wanted to be able to duplicate Treasury’s calculations for my own projections.
Howard says
New bill proposing $30,000 i bond purchases!
Do you think it will pass and if so how long till can we purchase?
Thx
Howard
Harry Sit says
I don’t think it’ll pass because most (> 90%?) bills simply die.
Bugler says
I don’t see the need. I-bonds have been around for years and most people ignored them because they were a bad deal. Inflation goes up and now we should pass a law making it easier for folks to buy more when they could have purchased them all along? When Inflation goes down, no one will want them again.
CuriousDave says
We don’t know the “needs” of our elected Congresspeople who decide whether or not to even put such a bill to the vote.
The Treasury has “needs” of its own and it may depend on how keen it is to have the public own I-Bonds at any given time and what volume it would like the public to keep rather than cash out. It has options of its own, such as increasing the fixed component of the composite interest rate from the current zero percent to a level that will keep them savers from cashing out their existing holdings when inflation eventually drops to an acceptable level.
Marion Julius Nesmith, Jr. says
Good morning,
Need some help with posting of interest.
I purchased 10k in Dec 21 and again in Jan 22
When should I expect to see some type of interest posted on treasury Direct?
Thanks,
Marion
Harry Sit says
The first value you see after logging in only shows the principal value. Clicking on it will show you the current value with interest. See the “Check Balance” section of this post.
Roy says
Well it’s about that time – has anyone calculated yet what the yield for I-bonds issued on or after November 1 2022 is likely to be? An October 12 WSJ article suggested it might be in the 6.4% range…
Harry Sit says
The variable rate will be 6.48%. There’s a chance that the fixed rate will go above 0%. I expect it to be 0.4% or 0.5% to be fair with the current yields on TIPS but they have total discretion in setting the fixed rate. I’ll be disappointed but I won’t be surprised if they keep the fixed rate at 0%.
Frank says
Now the Sept CPI is released, some predicts iBond rate for Nov – Apr 2023 is 6.23%. I am confused with the prediction. Since the CPI is 8.2%, would’t the iBond rate be higher than that?
Dunmovin says
Might as well be 20% or…given the nonfictional gift purchase option
Dunmovin says
Nonfunctional …sorry… it’s a fiction option
Roy says
Not sure why you call the gift purchase option “fiction” or “non-functional”. I used it on Treasurydirect and it works fine.
Dunmovin says
Hello! You haven’t been able to this week!
Lou Petrovsky says
As late as April 15 this year people could file a request to automatically extend the time to file their 2021 personal tax returns as late as today (Oct. 17), but by April 15 they still needed to pay whatever balance they figured they might owe. If they paid an additional $5,000 (on top of what they figured they owed) on April 15, and the return they file, say, today, shows they are due a refund of at least $5,000, if they direct that $5,000 be applied to the purchase of paper I Bonds, will that be treated as a 2021 purchase even though the payment was made in 2022? Also, will the interest rate on those paper bonds be based on the date their 2022 is processed, which is likely to be after this month (Oct.) and will then earn the reduced rate that will be set as of November 1?
Harry Sit says
Bonds purchased via tax refund go by the month in which they are issued. If the bonds are issued in November 2022 after the tax return is processed, they will earn interest at the same rate as any other bonds people buy in November. The only difference is they’re in paper form and they don’t count against the $10,000 annual limit.
Lou Petrovsky says
So that would mean that in the first year one purchases I Bonds, the maximum per individual (excluding trusts) can never be more than $10,000, because a tax return for that year cannot be file earlier than (usually some time in) January of the following year? Potentially, then, refunds for extended returns for 2021 filed, say, today (10/17/22) may not be processed until early 2023, so the refund applicable to 2021 could conceivably not be used to purchase $5,000 of I-Bonds until the first quarter of 2023, though those would at least earn the same rate of interest as purchases from refunds processed in November 2022? So much for the widespread belief that in our first year, purchases could aggregate $15,000.
Old mariner says
I’d say your first sentence is correct from a tax year point of view. If a person first bought $10K from Treasury Direct in May 2022, after they had filed their 2021 taxes without requesting paper bonds, then their maximum total of bonds issued in 2022 was $10K.
However, if a person bought their first $10K in Jan 2022, then got another $5K in paper bonds in April 2022, as far as they’re concerned they were issued $15K in 2022 regardless of the tax year under which they purchased the paper bonds.
You might get your bonds this year if you e-filed. Paper filing is a whole other story as read in the comments on another of Harry’s articles: “Overpay Your Taxes to Buy $5,000 in I Bonds.”
Harry Sit says
It depends on whether you already filed your tax return when you first learn of I Bonds. Suppose I first learn of I Bonds in February. I haven’t filed my tax return for the previous year yet. I make a payment with an automatic extension to make the refund go above $5,000. I file my tax return in March and I receive $5,000 in I Bonds in April. I also make an online purchase in March. That’s $15,000 in the first year. Which year the tax return was for is irrelevant.
If you learn of I Bonds only after you filed your tax return, then you missed the boat to buy the extra $5,000 in your first year.
SamV says
Does Linked bank account has to be their own account or it can be spouse’s account also ?
Like if my wife opens her TreasuryDirect account she has to link her own bank account only or she can use my bank account also ?
Harry Sit says
It doesn’t have to be but it probably helps when the name on the bank account matches the name on the TreasuryDirect account to reduce the risk of having the account locked and requiring a signature guarantee to unlock. TreasuryDirect can’t tell it’s a spouse’s account only by the last name on the account. A joint bank account works.
Dunmovin says
I used the same checking account (joint account) as spouse and trust but entered only last name for TD registration. Use a separate checking account for business
SamV says
So atleast Bank account name has to match TD account name for payment to go through?
Mahesh Reddy says
Hello Harry Sit, the new rate from Nov 1st seems to have a fixed rate of 0.4% and a variable rate of 6.89%. Could you please clarify below for me please?
As my account is not yet opened since 2 weeks , my wife purchased $10k for her and gift me another $10k(still in the gift box). The fixed interest for that is 0% with a variable rate of 9.62%.
1. Does the 0.4% fixed rate is applicable only for new bonds that we purchase over the next 6 months or is it applicable for the bonds purchased already?
2. If my account is open now by the end of this year(before last week), I plan to do the same and depending on future interest rates, we will deliver accordingly. Will the new bonds I purchase and gift, will have the 0.4% through it’s life and the variable rate changes every 6 months?
Could you please shed more light on this or provide an example if you could? TIA.
Harry Sit says
The fixed rate in effect at the time of the purchase is fixed for the life of the bond after you purchase it. Bonds bought in October 2022 have 0% fixed rate for life. Bonds bought in November 2022 or January 2023 have 0.4% fixed rate for life. Bonds bought in May 2033 will have a fixed rate to be announced at that time for life.
Mahesh Reddy says
Ok, understood, thank you for the clarification.
Luz says
Hi Harry, I have a question about beneficiaries. I just bought an I-Bond. Can I name my sister as beneficiary, she is a not a US citizen and a is a non-resident (living in another country)?
Old mariner says
Hi, based on what you wrote, I’d say your sister can’t be a beneficiary. According to this website: https://www.treasurydirect.gov/savings-bonds/buy-a-bond/, scroll down to “Registering savings bonds (Who owns them?)”:
“The person you name must meet these conditions:
1. The person must have a Social Security Number.
2. The person must also meet any one of these three conditions:
–a. United States citizen, whether the person lives in the U.S. or abroad, or
–b. United States resident, or
–c. Civilian employee of the United States, no matter where that person lives
Luz says
Thanks, Old Mariner
Tyler says
When a secondary owner (who has a TreasuryDirect Account) inherits an i-bond upon the death of the primary owner, does that affect the annual purchase limitations of the new owner in that same year?
Harry Sit says
Inheriting I Bonds doesn’t affect the annual purchase limit of the new owner.
Tyler says
Thanks for the quick reply Harry.
In the above scenario of inheriting:
1. Could the new owner redeem the inherited I Bond even if It was less than 12 months old?
2. Would new new owner also forfeit the last 3 months interest?
3. Could the new owner elect not to redeem but to keep it in his/her own account.
Harry Sit says
The new owner still has to follow the original terms of the bond. If it isn’t eligible for redemption yet or it’s still subject to the early withdrawal penalty, nothing changes just because the bond has a new owner. The new owner can choose to keep the bond to its original maturity (30 years from the date of issuance).
Tyler says
Harry,
I helped a married couple buy several $10,000 I Bonds in 2022. The husband died last week. The wife does not want to redeem/cash in any bonds. What advice do you have for the wife do next based on the following information:
Deceased husband has one bond in his own account.
Deceased husband has two undelivered bonds sitting in his wife’s gift box.
Wife has one undelivered bond in deceased husband’s gift box.
No bonds have been purchased by either husband or wife so far this year in 2023.
Thanks,
Tyler says
Harry, Here’s some additional information for the above couple:
The wife has access to deceased husbands TreasuryDirect account.
The wife is listed as the beneficiary on the undelivered bonds in her gift box for husband.
Wife is the secondary owner with transact rights on husbands Bond in his own account.
Harry Sit says
> Deceased husband has one bond in his own account with his wife as the second owner.
> Wife has one undelivered bond in deceased husband’s gift box.
The wife fills out Form 5511 with a signature guarantee to request transferring the bonds to her account. Sign as the account owner even though it’s her husband’s account. Attach a copy of the death certificate.
> Deceased husband has two undelivered bonds sitting in his wife’s gift box with wife as the beneficiary.
The wife writes a letter to request moving the bond out of her gift box to her as the beneficiary. Send the letter along with the Form 5511 above.
Tyler says
Harry,
I searched TD website without an answer. This makes perfect sense to me….Thanks for your help!!!!
Andy K says
Mr. Sit: Thank for all the detailed and very helpful info on I-bonds. Please clarify the following. I have set up bonds in separate accounts (each containing multiple $10K bonds) for myself, my wife and a Trust. I want to transfer all the bonds from our personal accounts into the Trust account. Can the Trust account receive via transfer more than one $10K bond per year ? Thank you
Harry Sit says
It can if you’re doing a one-time consolidation. It may become a problem if you routinely buy in three accounts and transfer them into one account each and every year.
Dunmovin says
Treasury Direct doesn’t want too many to plan on redeeming IBonds or so it seems…TD announced today:
4.30% This includes a fixed rate of 0.90%
For I bonds issued May 1, 2023 to October 31, 2023.
Lou Petrovsky says
In what way would the new, higher fixed rate deter existing I Bond owners from redeeming? If anything, would they not be incentivized to redeem 2 months and a day after their current 6 month term ends, and use the proceeds to purchase new I Bonds at the 4.30% composite rate? If I have calculated correctly, within 2 years the 0.50% fixed rate will make up for the 3 months loss of interest for early redemption.