New I-Bond rate is 9.62%

[RWG1950]

The Treasury Dept. announced this morning, the new 6 month rate on series "I" Savings Bonds is 9.62%, effective with 5-1-22 purchases.
The prior six month rate had been 7.12%.
You can learn more about this at TREASURYDIRECT.GOV

[Rapid Robert]

I-bonds have been attracting a lot of interest in the last few months for this reason. Here's some quick facts:

The current real interest component of I-bonds is zero percent. The rest of it is the inflation adjustment, so you are not earning any real rate of return (but still much better than holding cash or a bank savings account). Plus, government measure of inflation does not apply precisely to each individual, so there may be some real income (or loss) with this investment.

Interest income is taxable federal, tax-exempt state.

If you plan ahead, you can invest up to $5K tax refund into I-bonds, but otherwise you are limited to $10K per tax ID per calendar year. To get around this limit, some people advocate opening accounts in the name(s) of their children and/or creating an LLC strictly for the purpose of obtaining another tax ID. Not sure how that works out on the tax return, as I'm pretty sure they don't want to pay SE tax on the interest. Also there is the annual LLC fee ($800 in California) and extra cost to prepare tax returns. Also, putting the money in kids' names is a gift subject to UTMA as far as I know, but I'm sure many will violate the legal requirements if doing this. Interest alone on $10K will probably not trigger kiddie tax or a filing requirement, however.

The money is locked up for 1 year, and for 4 years after that there is a 3-month early withdrawal penatly. So maybe not the best place to keep an emergency fund, but still not bad for parking cash.

I've already bought $10K in my name last month, and spouse will probably do the same later this year when a CD at the bank comes up for renewal at a paltry 0.5% or something like that.

[Lion]

Is this like the old EEs that you can report each year on the child's return, seldom incurring any tax? So that when the child cashes out a bunch for college or whatever, he has only that year's interest to report on his return?

[ATSMAN]

I Savings Bonds are really getting popular. It has been mentioned in several TV Finance shows. My family and some friends are invested to the limit of $10K per year. Better than any Bank CD you can get these days!

[Rapid Robert]

"Is this like the old EEs that you can report each year on the child's return, seldom incurring any tax? So that when the child cashes out a bunch for college or whatever, he has only that year's interest to report on his return?"

Yes. And there is some ability to exclude the income if used for education, I haven't dug into those specific details, but here's a nugget:. "Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the [education] exclusion by the parent or the child."

Here is the lowdown:

https://www.treasurydirect.gov/indiv...axconsider.htm