That’s not the same, because I wouldn’t have owed any tax on it even if I filed, and there’s nothing affecting future income or returns. This case is different, because I’m reporting interest and possibly paying taxes without a 1099-INT, and then having to explain and adjust the actual 1099-INT many years later.
But I get what you’re saying, they’ll have to trust me to do it right and only prove it in case of an audit.
It is the same, because your child wouldnt owe any taxes on the interest either, even if they filed. Thus why a return is not required.
It’s not the same, because you omitted the second part – “there’s nothing affecting future income or returns”
It doesnt affect future income or returns. Once you’ve elected to claim the interest annually, the 1099 and adjustment is what’s expected since you cant simply decide to not claim the interest any year. While we’ve already concluded that there is some ambiguity in the exact interest earned each year (since they only give the current redemption value), the formula itself is pretty firm. Absent the variable rate and unknown redemption date, you could prepare that final year’s tax return today, adjustment and all.
So if you “miss” a year, you need to go back and correct the missed year (if you were required to file at all, or if the missed interest would then cause you to need to file), you cant just say oops and add it to the final year’s interest earnings instead.
And of course, you are “doing the return” each year to determine if you are required to file. So you know, and should keep a record of, the interest you have claimed each year depsite there being no tax return filed.
Silly question. Can you redeem a fraction of a $10,000 purchase without messing up the rest? For example, should I have bought 10x 1000 rather than 1x10,000?
" How much can I cash at one time?
| Electronic bonds in TreasuryDirect | You can cash a minimum of $25 or any amount above that in 1-cent increments. If you cash only a portion of the bond’s value, you must leave at least $25 in the TreasuryDirect account. Redemptions are comprised of principal and interest. (In a partial redemption, we pay interest only on the partial amount you cash.) |
|---|---|
| Paper bonds | Local banks have varying policies on how much they will cash in one transaction and some banks don’t cash savings bonds at all. If you send your bonds to Treasury Retail Securities Services, we cash them regardless of value if you meet requirements for cashing. |
Note: Individual paper bonds may not be split and must be cashed in full.|
Thanks! Unlikely I’ll need to redeem, but taxable assets are getting scarce these days 
It sounds like if you first convert the paper bonds to electronic on the TD site, you could probably partially cash them. That seems like it should be a fair easy process as long as the paper isn’t oddly titled.
https://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm
If you’re planning for a single partial redemption, you can do powers of 2 for fewer bonds, ie $1k, $2k, $4k, $8k (or maybe the last $3k), etc and get what you need by picking the right ones.
I just want to point out here, in the I bond thread, that buying in April is the last time to get the 7.1% rate corresponding to the last 6 months, rather than the newer 6 months ending March which we will have CPI numbers for later today.
Why does this matter if you’re just buying anyway because a 7-9% ~1 year bond is a great deal? You might use the gifting to buy more than the $10k annual limit, ie front load your purchase of $10k for 2023 as well, maybe even more. A spouse can buy more bonds and gift them to the other spouse at a rate of $10k/year whenever the receiver hasn’t bought any that year. So you can buy next year’s bond allocation today and start getting great rates now, and just complete the gift delivery in Jan. Or you can buy 2 years worth extra and plan on delivering them in Jan 2023 and Jan 2024, etc. or you can set up carbon copy trusts with separate EINs and buy $10k each, or…
Someone lobbying for a $100k/person cap on I bonds instead of $10k.
Here’s the CPI official March numbers -
Next 6 months will be 9.62%
I just front loaded through gifting option 2023 and 2024, that is on top of 20k that we bought in February.
How does that work practically? Did you designate a recipient who does not have an account and you’ll hold the I-bonds in gift box until they are ready to cash them out?
If you’ve bought $10k each of I-bonds in October 2021 and in Jan 2022 to max out the annual limits, can you still use the gifting option when both spouses have accounts already setup?
…can you still use the gifting option when both spouses have accounts already setup?
Yes.
The recipient doesn’t “receive” the gift until you release it from the gift box.
And it only counts against their limit in the year they receive it – so you want for a low-interest year to distribute the gift.
The “catch” to this, is that their total limit (purchase + gifts received) is all capped together.
So you don’t want to overdo it and end up with a multi-year distribution backlog.
You buy it on the name of someone else and indicate that it is a gift, Treasury will put those bonds in your gift box and they will start accumulate interest as any other bond. When you gift them to that person - amount will be counted vs that person’ limit for the year they received the gift. So husband and wife can buy unlimited gifts to each other as a front load for future years purchases.
Links how it works :
https://www.treasurydirect.gov/indiv/tools/purchasing-a-gift-bond.htm
https://www.treasurydirect.gov/indiv/tools/delivering-a-gift-bond.htm
So husband and wife can buy unlimited gifts to each other as a front load for future years purchases.
But still – keep in mind that you can only unwind up to the limit each year, so if rates dropped to zero, as an extreme case, you start having your “excess gifts” need to ride through a low period before you are functionally able to liquidate them. (so don’t overdo it)
My personal view is that before we will see 0% inflation it will be at least 4-5 years, and even then it will not be zero. I would not go 10 years forward but considering to buy up to 5 for myself. All should use their own judgment.
I think a better question is how long the I-Bonds will be paying more than other safe investments (CDs, T-Bills, bank accounts). Also, due to the annual limits, it depends on one’s financial situation. If you’re sitting on millions in cash you don’t know where to stash, then front-loading 10 years of gifts is probably a good idea.
Glad the refund bond buying worked out for you. You can read about less lucky folks here
https://www.bogleheads.org/forum/viewtopic.php?p=5981598#p5981598
Who seem to have just had the IRS issue a big refund and ignore their I bond request. They were giving some long shot resolution process to get them, but no word if it worked.
Damn! At this rate, the bonds purchased for my nieces and nephews might exceed the $1100 annual earning limit to not have to file a return. Although, as scripta has discussed before regarding the interest earnings, with the three month redemption penalty being backed out from the accrued value, I think I’ll still be able to find a calcuation that keeps the claimed interest below the limit.
I’d already front loaded 2023, and am quickly doing 2024 this month. I want to do 2025 as well, but that’s an awful lot to funnel through a third party, and a long time to leave sitting in their account as undelivered gifts (even though per TD terms it’s irrevocably “my” bond regardless).