I Bonds - The Time to Buy is Now
If you have never considered purchasing I Bonds, the time to do so is now. I Bonds are federal savings bonds whose interest rates fluctuate with inflation. Currently, the initial interest rate on new Series I Savings Bonds is 9.62 percent!
I Bonds can be purchased through October 2022 at the current rate. That rate is applied to the 6 months after the purchase is made. For example, if you buy an I bond on July 1, 2022, the 9.62% would be applied through December 31, 2022. Interest is compounded semi-annually.
To purchase I Bonds, you need to open an account through TreasuryDirect.gov. Each purchaser can purchase a maximum of $10,000 electronic I Bonds each calendar year. Spouses can each open their own account, thereby you can purchase $20,000 a year between the two of you.
If you’re eligible for an income tax refund, you can also elect that up to $5,000 of your refund is paid to you as a paper certificate I Bond, which would increase your total possible maximum purchase per year to $15,000. You do this by filing Form 8888 when you file your tax return (be sure to talk to PPG Partners or your tax preparer about this).
You can also open a TreasuryDirect.com account and purchase I Bonds in the name of a business or a trust. If you have a trust or own a corporation, LLC, partnership, or a Schedule C sole proprietorship, they can all purchase a maximum of $10,000 in I Bonds per year. Between purchases with your spouse, your businesses, your trusts, and your tax refund, you can see how you can potentially purchase much more than just the $10,000 annual maximum.
I Saving Bonds earn interest based on combining a fixed rate and an inflation rate. The interest it earns is a combination of a fixed rate that stays the same for the life of the bond and an inflation rate that is set twice a year. As mentioned above, for bonds issued from May 2022 through October 2022, the combined rate is 9.62%.
I Bonds are federally taxable, but are not state taxable. The minimum purchase of an electronic I Bond is $25, and a paper I Bond is $50 (you can only buy a paper I Bond when filing your federal tax return). You can buy electronic I Bonds in any amount, to the penny, from $25 to $10,000. You can buy paper I Bonds through your tax return in the amounts of $50, $100, $500, or $1,000.
I bonds earn interest for 30 years unless you cash them first. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.)
For more information or if you’re interested in purchasing I Bonds, visit TreasuryDirect.gov.