Expecting a tax refund this tax season? If so, you may be interested in a convenient savings option offered by the U.S. Department of the Treasury. Taxpayers may buy paper Series I Savings Bonds, in amounts ranging from $50 to $5,000, with their annual tax refund by completing the "Allocation of Refund (Including Savings Bond Purchases)" IRS Form 8888. TreasuryDirect online account holders may deposit all or part of their tax refunds into their TreasuryDirect accounts.
"Each new tax season gives people a chance to build their savings," says Jerry Kelly, national director of the Treasury Department's Ready.Save.Grow. campaign. "The average annual tax refund of $3,000 can compound over time when invested in savings bonds. I encourage tax refund recipients to learn more about the benefits of savings bonds as they plan for long-term savings goals."
To use your tax refund this year to buy savings bonds, follow these steps:
Why Series I Savings Bonds?
Series I Savings Bonds currently offer an interest rate of 1.76 percent, and they're exempt from state and local income taxes. What's more, interest earnings may be exempt from federal income taxes when the earnings are used to pay for qualified higher education expenses.
I Bonds are long-term savings instruments that can help support a home purchase, retirement, college savings or other life goals. You must hold an I Bond for at least one year after it's issued, but it's best to hold it for at least five years to avoid any early redemption penalty. To learn more about the value of savings bonds, the Treasury Department's Savings Bonds Calculator will come in handy.
Save With Savings Bonds Year-Round
U.S. Savings Bonds are a good investment at tax time – or anytime. Payroll direct deposit through your employer is a convenient option for building a regular savings habit. Every payday you can automatically contribute to your TreasuryDirect account and begin building your nest egg. To learn more about payroll direct deposit and other Treasury securities go to the Ready.Save.Grow. website at www.treasurydirect.gov/readysavegrow.
The preceding information was provided by the U.S. Department of the Treasury, Bureau of the Fiscal Service. TreasuryDirect is a registered mark of the U.S. Department of the Treasury.
Ready.Save.Grow. is a service mark of the U.S. Department of the Treasury.