Can I use my tax refund to buy I Bonds? Details on rates, deadline

The inflation rate may be slowly creeping down, but those who are saving can secure a great bargain for I Bonds if they make their purchases before the end of April. Since we’re in the middle of tax season and tax time is upon us, it’s important to be aware of an option to file an application with your tax return and direct a portion (or all) of the tax rebate up to $ 5,000 which can be used to purchase Series I Savings Bonds, called I Bonds.

However, it’s a good idea to file the tax return as soon as possible to get a great rate, too. But, be clear that buying I Bonds now isn’t the easy-to-buy-the-cart option that was at the time I Bonds turned trendy in 2022. It’s a good time to talk about rates right now. However, there are a lot of unknowns in the future rates.

What is the current rate on I Bonds?

If you decide to purchase I Bonds before the end of April, you’ll begin with an annualized interest rate of 6.89 percent, which would be applicable for six months following the purchase of the bond. The initial rate is for I Bonds issued by the Treasury Department from November 1st, 2022, until April 30, 2022. The bonds have a 0.4 percent fixed rate and the floor rate that will affect the entire bond life. The annualized rate influenced by inflation of 6.48 percent is then added to the floor. Then the annualized rate is rounded to 6.89 percent. The 6.48 annualized rate of 6.48 percent will be applicable to a 6-month period for those who are keeping I Bonds from the past, including those issued 10 or 20 years ago, as the new adjustments to inflation are routinely made.

The restrictions: Bonds cannot be redeemed anytime during the first twelve months. If you redeem them before the five-year anniversary, you’ll lose the last three months ‘ interest. If inflation were extremely low, you’d only lose a small percentage of your interest. We aren’t sure of the details of the direction that inflation may take in the short term. However, it seems to be declining in the long term. “It’s all about jumping around nowadays,” said Daniel Pederson, a Michigan-based savings bonds expert and co-founder of www.BondHelper.com.

What do you need to learn about I Bonds?

One of the most important things to know. Pederson said that the inflation adjustment. In I, Bonds focuses on a shorter period of six months to collect inflation data, not a complete year. “With I Bonds, you always have this six-month gap you’re working with.” Pederson said. The purchase of a home prior to the close of April is a good idea. Pederson explained it makes the most sense, as it guarantees the 6.89 percent annualized rate for six months.

 Because monthly inflation figures have been difficult to forecast during the year, it’s more difficult to anticipate what’s in store for the rate announced on May 1. The rate adjusted for inflation that will be announced at that time that would be applicable to bonds purchased from May through October is expected to be lower. Pederson said it could vary between 2% and slightly above 5%, based on the inflation numbers.

The I Bond rate is set twice a year in November and  May. The most recent inflation figures available for October, November, December, January, and October suggest a lower interest rate will be announced in May.

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