US Savings Bonds

Archive for April, 2010

Thrift Savings Plan Webcast

Question: My dependant son will be attending a community colllege?

How do I figure out which tax approach to use? Hope, lifetime learning, tuition deduction, Savings Bonds Interest exclusion? His tuition is about $3,600/year. Are there any calculators to figure this out?

Answer: Some software has calculators to figure out the best education benefit, but if you really want this analysis you need to go to a tax preparer who can do this for you. Professional preparers with proprietary software can run the numbers for you.

In your case, if your income is less than $80K ($160K if married), the best break for your education expenses is the new American Opportunity Credit which has replaced the Hope Credit. The AOC will credit you 100% of the first $2,000 of qualified expenses, plus 25% of the next $2000 of qualified expenses, for a maximum credit of $2,500. Even if you owe no tax, 40% of this credit is refundable, meaning you may receive a payment of up to $1,000 if you owe no tax but take the maximum credit.

Any expenses you pay for with EE Savings Bonds for which you exclude the interest will not be counted toward the AOC.

What are Series I Bonds?

Series I Bonds, also called Series I Savings Bonds or Series I government bonds are also popular US Savings Bonds along with Series E and EE Savings Bonds. In the past, you can only purchase and invest in Series I Bonds in paper form. Nowadays, you can invest in the US government ’s Series I Bonds electronically.

How are Series I Bonds sold?

The US government ’s Series I Bonds are sold at face value. The maximum amount of Series I Bonds you can purchase in a year is currently $30,000

How to buy Series I Bonds?

Series I Bonds can be purchased in denominations of:

• $50,
• $75,
• $100,
• $200,
• $500,
• $1,000,
• $5,000, and
• $10,000.

Interest rates on I Bonds and redemption

The interest rates on I bonds are forfeited on the most recent 3 months’ interest if you buy the US Series I Bonds and then redeem them within 5 years. If you hold onto US Series I Savings Bonds for more than 5 years, there is no penalty on the interest on I bonds.