Taxpayers can buy Series I U.S. Savings Bonds with a portion or all of their tax refunds. Savings bonds are a great way to start or increase your overall savings.
Issued by the Department of the Treasury, Series I bonds are low-risk bonds that grow in value for up to 30 years. While you own them, they earn interest and protect you from inflation.
It's simple and easy to buy savings bonds with your tax refund. During the e-file steps, just check the box when asked if you would like to purchase savings bonds. Purchasing bonds with your tax refund must be done in increments of $50. In any single calendar year, you can purchase up to $5,000 of I bonds under this program. If you don't buy I bonds with 100 percent of your refund, you will need to have another account in which to deposit the remaining amount of your refund. For example, if your refund is $280, you can direct $250 to I bonds and the $30 balance to your savings account.
When you purchase savings bonds with your tax refund, you will receive paper bonds, issued in your name and mailed to the address on your tax return. If you are married and filed a joint return, the bonds will be issued in your name and your spouse's name. You cannot designate a beneficiary under this option. It could take up to three weeks for your savings bonds to be issued. Generally, you will receive the bonds after you receive the remainder of your tax refund.
Series I bonds pay interest based on a combination of a fixed rate, which remains the same throughout the life of the Savings Bond, plus a semiannual inflation rate which is updated each May and November.The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.