Has anyone been using the following way to purchase U.S. Savings Bonds, Series I, with income tax refunds? Maybe we should be.
Up to $5000 of income tax refund can be routed (Form 8888) to purchase U.S. Savings Bonds, Series I. That is advantageous because there are purchase limits on those savings bonds. When Treasury Direct auctions off TIPS (Treasury Inflation-Protected Securities), there have been in recently years NEGATIVE yields for the 5-year and 10-year notes. Those notes pay 0% plus inflation adjustment, but the negative yield is achieved by requiring purchasers to pay a premium at original issue. Contrast that with Series I U.S. Savings Bonds, which also currently are issued with 0% plus inflation adjustment, but which have no requirement to pay a premium at original issue, plus certain other tax advantages such as deferred reporting of income.
There is nowadays a limit of $10,000 (up last January from $5000) per person on Series I Savings bonds purchased via Treasury Direct or via payroll deductions. Such savings bonds can no longer be purchased at financial institutions. However, the $5000 that can be purchased with a tax refund is, as I understand it (I provide no warranties), in addition to the $10,000 limit.
The bottom line is that purchase of the Series I savings bonds can be an advantageous move for some individuals. It would pay to have enough withholding and estimated tax to be able to purchase bonds, aside from the advantage of not being surprised with any balance due to the IRS. The possible problem is that some e-filing software will not handle the savings bond purchase (Form 8888).
Up to $5000 of income tax refund can be routed (Form 8888) to purchase U.S. Savings Bonds, Series I. That is advantageous because there are purchase limits on those savings bonds. When Treasury Direct auctions off TIPS (Treasury Inflation-Protected Securities), there have been in recently years NEGATIVE yields for the 5-year and 10-year notes. Those notes pay 0% plus inflation adjustment, but the negative yield is achieved by requiring purchasers to pay a premium at original issue. Contrast that with Series I U.S. Savings Bonds, which also currently are issued with 0% plus inflation adjustment, but which have no requirement to pay a premium at original issue, plus certain other tax advantages such as deferred reporting of income.
There is nowadays a limit of $10,000 (up last January from $5000) per person on Series I Savings bonds purchased via Treasury Direct or via payroll deductions. Such savings bonds can no longer be purchased at financial institutions. However, the $5000 that can be purchased with a tax refund is, as I understand it (I provide no warranties), in addition to the $10,000 limit.
The bottom line is that purchase of the Series I savings bonds can be an advantageous move for some individuals. It would pay to have enough withholding and estimated tax to be able to purchase bonds, aside from the advantage of not being surprised with any balance due to the IRS. The possible problem is that some e-filing software will not handle the savings bond purchase (Form 8888).
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