30 Sep I Bonds are paying nearly 10% interest. How much can I buy?

Q. I know I-Bonds pay a lot of interest now but I’m only limited to $10,000 a year. I heard you can buy more when you file a federal tax return. Is that true, and how does it work?
— Investor

A. I Bonds are saving bonds issued by the federal government.

And you’re right. They are paying a lot of interest right now.

Through October 2022, they are paying a fixed 9.62% and are adjusted each year for inflation, said Howard Milove, a wealth advisor with Access Wealth in East Hanover.

“As investments go, I Bonds are considered virtually risk-free, making them popular in times of market uncertainty and inflation,” he said. “You are correct though; there is a $10,000 limit each year for purchasing I Bonds.”

The good news is there are a few ways around this limit.

Individuals can purchase an additional $5,000 of I Bonds per year by using their federal tax refund, Milove said.

To use your federal tax refund, you must file Form 8888 and submit it with your tax return, he said.

You must designate the owner of the bonds in Part II of the from, he said.

“The bonds must be purchased in multiples of $50 and the maximum amount is $5,000 or your refund amount, whichever is smaller,” he said.

It’s also worth noting that these additional bonds can only be purchased in paper form, meaning you will receive the actual paper bond in the mail. You can eventually convert these bonds to digital, which may be more secure if you don’t have a safe to store them in, and it gives you online access to monitor the value of your bonds, he said.

“Since the limit is per person, if you are married, your spouse is allowed to purchase $10,000 in I Bonds as well,” Milove said. “Additionally, if you file separate tax returns, your spouse is allowed to purchase the additional $5,000 in paper bonds.”

You may also purchase up to $10,000 in I Bonds for your children, he said. but they must be used for the benefit of the child, he said.

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This story was originally published on Sept. 30, 2022.

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