Buy Series I Bonds with Your Tax Refund

The Treasury Department and the IRS have joined forces to allow you the ability to buy Series I Bonds directly with your tax refund. Series I bonds are thirty-year bonds that accrue interest based on a fixed rate, associated with the time you buy the bond and never changes, and an inflation rate, which changes every May and November.

How do you buy the bonds? Fill out IRS Form 8888, Direct Deposit of Refund to More Than One Account, and put 043736881 as the routing number and BONDS as the account number. If your refund is in exact multiples of $50, you don’t need Form 8888, just put those details directly into your tax return.

Your bonds will be paper certificates and will arrive three weeks after your return is processed.

How is the interest rate calculated? The interest rate of the bond is calculated using a composite rate made up of the bond’s fixed rate and a floating inflation rate. You can use this Series I bond interest rate calculator, which includes the equation, to calculate the interest rate.

As of this writing, the fixed rate is 0.30%, the inflation rate is 1.53%, so Series I bonds bought today would yield around 3.365%.

Is this a good idea? I think Series I bonds can be a good investment but being able to buy them directly offers no significant advantage. You can buy Series I bonds just by visiting your bank and there is no sales fee or commission.

You can learn more by reading the Treasury Direct FAQ on using your income tax refund to buy Series I savings bonds. Also, this page gives you all the details on Series I bonds.

Jim writes about personal finance at Bargaineering.com.