Using Your Income Tax Refund to Buy Paper Savings Bonds — TreasuryDirect (2024)

FAQs

Using Your Income Tax Refund to Buy Paper Savings Bonds — TreasuryDirect? ›

To buy paper savings bonds, you use IRS Form 8888 to specify how much of your refund should go to savings bonds and how much to you directly (by check or by direct deposit to your bank account). On Form 8888, you also specify who will own the bonds.

You can use all or part of your tax refund to purchase I bonds. Your request for bonds must be in increments of $50. Any remaining refund amount not used to purchase bonds will be mailed to you as a paper check or you may elect to have the remaining amount direct deposited into a checking or savings account.

The only way to get a paper savings bond is to use your IRS tax refund. With your tax refund, you can buy savings bonds for anyone (yourself, your child, or as a gift to anyone). Starting January 1, 2025, this option will be discontinued. See our FAQ.

More flexible than a bank!

Note: We have 2 minimum requirements for cashing bonds: The bond must be at least 1 year old. If you cash only part of what a bond is worth, you must leave at least $25 in your account. You can cash your savings bonds in full or in part. (Paper bonds can only be cashed in full.)

Interest from your bonds goes on your federal income tax return on the same line with other interest income.

Use the Education Exclusion

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent.

Requests to search for lost, stolen or missing savings bonds require at least 4 months to process. Other paper savings bond transactions you are authorized to handle, but not in your name require at least 6 weeks to process.

Traditional savings and money market accounts allow you to earn interest and access your money right when you need it. Bonds, on the other hand, grow slowly in value and are worth the most after 20 to 30 years. Consider savings bonds for your long-term savings goals.

After 20 years, it doubled in value ($1,000) and continued to earn interest ($600) until reaching maturity after 30 years. If you redeem your bond today, you can redeem it for $1,600 and spend that on goods or services or reinvest that money in a new savings bond.

You can cash paper bonds at a bank or through the U.S. Department of the Treasury's TreasuryDirect website. Not all banks offer the service, and many only provide it if you are an account holder, according to a NerdWallet analysis of the 20 largest U.S. banks.

How do I avoid taxes when cashing in savings bonds? ›

You can report the interest each year you earn it or when you cash the bond. You will report it on Schedule B of your 1040. You can avoid these taxes by using the money for qualified higher education expenses.

If you have paper savings bonds, you can fill out the appropriate form and mail it and the bonds you want to cash to the Treasury Retail Securities Services — the address is listed on FS Form 1522. Additionally, you may be able to cash your paper savings bonds at your bank or credit union.

You can redeem a savings bond online at the Treasury Department's TreasuryDirect website, by mail or at your local bank or credit union, if they offer the service. Your savings bond must be at least a year old, and you'll need government-issued identification to prove that the bond is yours.

Can I still purchase a paper series I bond with my refund? Yes. When you file your 2023 tax return by October 15, 2024, include IRS Form 8888. Complete Part 2 to tell the IRS you want to use part (or all) of your refund to purchase paper I bonds.

1099 forms are available by January 31 of each tax year. If you invest in Legacy Treasury Direct, each year you'll receive a 1099 during January (1042-S during March if you're a foreign investor) showing the interest you've earned. If you have registered securities, you'll receive your 1099 through the mail in January.

The interest you earn on corporate bonds is generally always taxable. Most all interest income earned on municipal bonds is exempt from federal income taxes. When you buy muni bonds issued by the state where you file state taxes, the interest you earn is usually also exempt from state income taxes.

Yes, I bonds are subject to taxation. But they provide certain tax benefits that distinguish them from other investments and can result in lower tax payments. The original amount you invested in the bond isn't taxed, but the interest earned is.

You can buy I bonds in electronic form, at face value, after you open a TreasuryDirect® account. Purchase prices start at $25, and you can buy in any amount above that up to $10,000 per person, per calendar year. You also can buy an I bond in paper form, through the Tax Time Purchase Program.

You can designate up to $5,000 of your federal refund toward up to three Series I bonds, which will be mailed to the address on the your return. You'll see the option to purchase bonds when you get to How would you like to receive your federal refund? in the File section.

Investment advisers say now is a fine time for bonds. They are a good investment in 2024, experts say, for the same reasons they felt like a bad investment in 2022.