In recent years, many Americans have discovered the joys of investing in Series I government savings bonds.
The bonds earn interest based on both a fixed rate and a variable inflation-based rate, the latter of which has made them popular in this era of rising prices.
However, the U.S. Treasury recently made it tougher to build up inflation-protected savings through these bonds, commonly known as “I bonds.”
Previously, you could purchase a total of up to $15,000 per year in Series I savings bonds by buying both:
- Up to $10,000 per year in electronic I bonds through the TreasuryDirect website
- Up to $5,000 per year in paper I bonds with your federal income tax refund (by filling out IRS Form 8888 when filing your taxes) — an option known as the Tax Time Savings Bond program
However, starting on Jan. 1, 2025, savers will no longer be allowed to use their tax refund to purchase paper I bonds.
In other words, you can still purchase $10,000 worth of I bonds electronically each year, but you cannot buy the additional $5,000 worth of paper I bonds at tax time.
This effectively reduces the maximum amount of I bonds you can purchase annually from $15,000 to $10,000 — a 33% decrease.
In a post announcing the change on the TreasuryDirect website, the Treasury explained why it was doing away with the option to use a tax refund to purchase paper I bonds:
“This option was costly and not frequently used. The mailing of physical savings bonds was also subject to fraud, theft, loss, and delays. Buying savings bonds online is simple, safe, and affordable.”
Money Talks News asked the Treasury why it made such a drastic change to the maximum annual purchase limit when it could have simply modernized the Tax Time Savings Bonds program by allowing taxpayers to use their refund to buy additional electronic I bonds instead of paper ones.
A Treasury spokesperson cited infrequent use of the program, telling Money Talks News:
“The [Tax Time Savings Bonds program] averaged $28.7 million in sales annually from 2010-2022, which was less than 1 percent of all series I savings bond purchases. Even throughout the I bond surge in 2022, very few (less than 1 percent) of Tax Time Savings Bonds participants purchased up to the full limit of $10,000 in electronic bonds as well as $5,000 in paper bonds using their tax refund.”
Of course, the ability to purchase $10,000 in I bonds annually is still a great deal for some people. But as with any type of investment or savings vehicle, there are pros and cons to purchasing I bonds.
To learn more about I bonds — and whether they might be right for you — check out “7 Things You Should Know Before Investing in I Bonds.”
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