Did Aunt Helen faithfully buy you a United States savings bond for every birthday, when you would rather have had a gift certificate to a favorite store? You can still buy paper Series I bonds using your tax refund.
Savings bonds, those ultra-safe investments suitable for educational funds and a favorite of parents, grandparents and doting aunts and uncle everywhere, turned out to have paid a good return during the low interest rate environment of the early 21st century and are still a top choice for funding higher education expenses.
EE bonds were last issued When does a savings bond mature paper format in Those bonds issued from May, onward will earn interest for 30 years, but reach face value maturity at 20 years when they change from a fixed to an annual rate.
EE bonds are sold at half of face value. If the compounded interest on the bond does not allow it to reach face value at 20 years, the Treasury Department permits a one-time adjustment so that face value equals bond value.
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As of May 1,the annual interest rate on EE bonds is 0. You will know the rate of interest the bond earns at the time of purchase, and the Treasury Department announces rates for new EE bonds on May 1 and November 1 of each year. If an EE bond is cashed in within the first five years, there is a penalty consisting of the last three-month period of interest.
Rates for older EE bonds are calculated in a different manner. These bonds earn a market-based rate of 90 percent of the six-month average of five-year Treasury Security yields.
As of Maythe rate for these bonds is 2. I bonds are purchased at face value, and earn interest based on 90 percent of the six-month average of five-year Treasury Security yields, much like older EE bonds.
I bonds earn monthly interest and are compounded semiannually for up to 30 years. As of May 1,the rate on the I bond is 2.
HH bonds have not been available for sale sincebut the last of these bonds will mature in They are purchased at face value, and are used primarily as retirement income supplementation rather than for educational expenses. Unlike EE or I bonds, H bond holders receive interest payments every six months via direct deposit into a checking or savings account.
Interest rates on these bonds are fixed, changing once on the year anniversary of the bond issuance. While savings bonds' interest is subject to federal taxes after redemption, they are not subject to state and local taxes.
However, when savings bonds are used to pay for educational expenses, they are not subject to federal tax.
To qualify for this exclusion, the higher educational expenses must be incurred the same year as the bonds are redeemed. If used for your own education, the bonds must be in your name.