I Bonds Mega Thread (I Bond Heads Rejoice!)

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Grogs
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grogs »

Chuck wrote: Tue Jan 24, 2023 1:36 pm https://eyebonds.info/ibonds/index.html will show you the value of an I-Bond as far in the future as is knowable.
Thanks, that's useful. I was just on TD tonight trying to figure out when interest was credited and, as far as I can tell, the TD website doesn't show you that. Does anybody know how often the bond value gets updated? I bought one last year on 1/28/22, and according to the TD site, it's worth $10,604. The eyebonds site shows that as the 10/1/22 value. So does Treasury Direct only credit interest in certain months? April and October maybe, or does it vary based on the month you purchased the bond?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by alluringreality »

Grogs wrote: Tue Jan 24, 2023 8:54 pm Does anybody know how often the bond value gets updated? I bought one last year on 1/28/22, and according to the TD site, it's worth $10,604. The eyebonds site shows that as the 10/1/22 value.
After the first 3 months, Treasury Direct will add value monthly. The eyebond site does not list the 3 month penalty for redeeming before 5 years, while the Treasury Direct site balance accounts for the penalty. Essentially the difference relates to the 3 month penalty for redeeming before 5 years.
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RustyShackleford
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by RustyShackleford »

jj wrote: Sat Nov 19, 2022 5:37 pm
I've been buying I-bonds starting this year. I plan to report my interest income when I redeem in the future. In the meantime, will I be receiving a 1099 to report even if there are no redemption(s) like for this year? Thanks.
There is no 1099 unless you redeem an I bond.
So if you want to report your interest in the year earned, you just have to compute it for yourself ?
Grogs
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Grogs »

alluringreality wrote: Tue Jan 24, 2023 9:03 pm
Grogs wrote: Tue Jan 24, 2023 8:54 pm Does anybody know how often the bond value gets updated? I bought one last year on 1/28/22, and according to the TD site, it's worth $10,604. The eyebonds site shows that as the 10/1/22 value.
After the first 3 months, Treasury Direct will add value monthly. The eyebond site does not list the 3 month penalty for redeeming before 5 years, while the Treasury Direct site balance accounts for the penalty. Essentially the difference relates to the 3 month penalty for redeeming before 5 years.
Thanks, now it's making more sense. I probably would have figured it out if I checked TD more often, but I've only been on once since buying my ibonds last year.
infotrader
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by infotrader »

i have some quick questions:

1) If I want to buy it to use this year's 10k quota, should I buy it now, or wait? I will get the 6.89% rate until the end of May, right?
2) If I buy it today, do I get Jan interest?
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by TwstdSista »

infotrader wrote: Wed Jan 25, 2023 12:16 pm i have some quick questions:

1) If I want to buy it to use this year's 10k quota, should I buy it now, or wait? I will get the 6.89% rate until the end of May, right?
2) If I buy it today, do I get Jan interest?
1 - you have until the end of April (second to last business day, I believe). In April we may have a better idea as to what May's rate will be.
2 - yes, you will get a full month's interest for January if you buy today.
infotrader
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by infotrader »

TwstdSista wrote: Wed Jan 25, 2023 12:20 pm
infotrader wrote: Wed Jan 25, 2023 12:16 pm i have some quick questions:

1) If I want to buy it to use this year's 10k quota, should I buy it now, or wait? I will get the 6.89% rate until the end of May, right?
2) If I buy it today, do I get Jan interest?
1 - you have until the end of April (second to last business day, I believe). In April we may have a better idea as to what May's rate will be.
2 - yes, you will get a full month's interest for January if you buy today.
Thank you!
I am not sure of the reason of waiting to see the May's rate. In which scenario will we not buy it? Interest rate drops to 2%? If it stays above 4% for example, and I still want to buy, is it worth losing 3 month worth of 6.89% interest?
Chuck
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Chuck »

The CPI change from June to December was 0.16%. If this trend continues through March, you'll be looking at 6 months of near-zero to average into your 6.89%.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by TwstdSista »

infotrader wrote: Wed Jan 25, 2023 1:14 pm ....
Thank you!
I am not sure of the reason of waiting to see the May's rate. In which scenario will we not buy it? Interest rate drops to 2%? If it stays above 4% for example, and I still want to buy, is it worth losing 3 month worth of 6.89% interest?
May's fixed rate might be higher than the current .4% fixed rate. That might be attractive to someone who wants to hold IBonds long term. And you wouldn't "lose" 3 months worth of 6.89% interest - buying in May, you would lose that interest rate completely. But if you buy in April, you would still get the full 6 months.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

TwstdSista wrote: Wed Jan 25, 2023 2:38 pm
infotrader wrote: Wed Jan 25, 2023 1:14 pm ....
Thank you!
I am not sure of the reason of waiting to see the May's rate. In which scenario will we not buy it? Interest rate drops to 2%? If it stays above 4% for example, and I still want to buy, is it worth losing 3 month worth of 6.89% interest?
May's fixed rate might be higher than the current .4% fixed rate. That might be attractive to someone who wants to hold IBonds long term. And you wouldn't "lose" 3 months worth of 6.89% interest - buying in May, you would lose that interest rate completely. But if you buy in April, you would still get the full 6 months.
And, if for some reason you decide to redeem them because the rate drops drastically, you may want to wait three months so that you're not losing three months at 6.89% but rather, three months at that new lower rate.
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Chuck
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Chuck »

Mel Lindauer wrote: Wed Jan 25, 2023 2:43 pm And, if for some reason you decide to redeem them because the rate drops drastically, you may want to wait three months so that you're not losing three months at 6.89% but rather, three months at that new lower rate.
You're talking about I-Bonds that you're already holding, right? Because if you buy in April you're holding until next April no matter what.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Mel Lindauer »

Chuck wrote: Wed Jan 25, 2023 2:48 pm
Mel Lindauer wrote: Wed Jan 25, 2023 2:43 pm And, if for some reason you decide to redeem them because the rate drops drastically, you may want to wait three months so that you're not losing three months at 6.89% but rather, three months at that new lower rate.
You're talking about I-Bonds that you're already holding, right? Because if you buy in April you're holding until next April no matter what.
Yes. Should have made that clearer.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by HomeStretch »

Assume the original I-Bond holder has deferred interest for Federal tax reporting purposes…

Is the following correct?
If an I-Bondholder dies and the I-Bond transfers to a named beneficiary, the cumulative interest at date of death can be handled in any of the following ways:
(1) reported on the decedent’s final tax return, or
(2) reported on the Estate return, or
(3) continue to be deferred which means the inheritor will report all interest when the I-Bond matures or is redeemed.

If the the cumulative I-Bond interest is reported in year of death (option #1 or #2, above), does the inheritor have to then going forward report interest annually? Or can the inheritor choose to defer the remaining interest until maturity/redemption?

Thanks for any help with this.
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Post by HueyLD »

HomeStretch wrote: Wed Jan 25, 2023 3:33 pm Assume the original I-Bond holder has deferred interest for Federal tax reporting purposes…

Is the following correct?
If an I-Bondholder dies and the I-Bond transfers to a named beneficiary, the cumulative interest at date of death can be handled in any of the following ways:
(1) reported on the decedent’s final tax return, or
(2) reported on the Estate return, or
(3) continue to be deferred which means the inheritor will report all interest when the I-Bond matures or is redeemed.

If the the cumulative I-Bond interest is reported in year of death (option #1 or #2, above), does the inheritor have to then going forward report interest annually? Or can the inheritor choose to defer the remaining interest until maturity/redemption?

Thanks for any help with this.
IRS Pub 550 under “U.S. Savings Bonds” includes reporting rules upon the death of an owner.

https://www.irs.gov/publications/p550#e ... nk10009916

“ Decedent who postponed reporting interest.

(1) If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways.

The surviving spouse or personal representative (executor, administrator, etc.) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. The person who acquires the bonds then includes in income only interest earned after the date of death.

(2) If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate.

For more information on income in respect of a decedent, see Pub. 559, Survivors, Executors, and Administrators.”
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Post by HomeStretch »

HueyLD wrote: Wed Jan 25, 2023 3:56 pm IRS Pub 550 under “U.S. Savings Bonds” includes reporting rules upon the death of an owner. …
Thank you! I didn’t realize there was an IRS Publication that covered US Savings Bonds.
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Post by dbr »

HomeStretch wrote: Wed Jan 25, 2023 4:40 pm
HueyLD wrote: Wed Jan 25, 2023 3:56 pm IRS Pub 550 under “U.S. Savings Bonds” includes reporting rules upon the death of an owner. …
Thank you! I didn’t realize there was an IRS Publication on US Savings Bonds.
Savings Bonds are one of many items included in Pub 550. Savings Bonds cover about 3 pages of 77 in total.

https://www.irs.gov/pub/irs-pdf/p550.pdf

It isn't a bad idea to look through that document sometime once.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by RustyShackleford »

So if I buy an i-bond before the end of January, I get the current 6.89% rate until July, no matter what. Then, suppose the rate goes to 0.4% in July, and I surrender the thing as early as I can, in January 2024. I've still earned about 3.6% for the year, only about a 1% below regular 1-year Treasuries. But that's a worst-case scenario.

Do I have this right ?
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Post by infotrader »

TwstdSista wrote: Wed Jan 25, 2023 2:38 pm
infotrader wrote: Wed Jan 25, 2023 1:14 pm ....
Thank you!
I am not sure of the reason of waiting to see the May's rate. In which scenario will we not buy it? Interest rate drops to 2%? If it stays above 4% for example, and I still want to buy, is it worth losing 3 month worth of 6.89% interest?
May's fixed rate might be higher than the current .4% fixed rate. That might be attractive to someone who wants to hold IBonds long term. And you wouldn't "lose" 3 months worth of 6.89% interest - buying in May, you would lose that interest rate completely. But if you buy in April, you would still get the full 6 months.
I see, does that mean: if I buy it in April, if the rate stays the same, I can have 6 months of 6.89% and 6 more months of whatever is announced is April?If it drops to 0.4, I just don't buy it at all.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by poker27 »

RustyShackleford wrote: Wed Jan 25, 2023 6:08 pm So if I buy an i-bond before the end of January, I get the current 6.89% rate until July, no matter what. Then, suppose the rate goes to 0.4% in July, and I surrender the thing as early as I can, in January 2024. I've still earned about 3.6% for the year, only about a 1% below regular 1-year Treasuries. But that's a worst-case scenario.

Do I have this right ?
Not sure if you computed the penalty in your calculation, but you would lose the last 3 months of interest as well (.4% in your example)
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by RustyShackleford »

poker27 wrote: Wed Jan 25, 2023 9:32 pm
RustyShackleford wrote: Wed Jan 25, 2023 6:08 pm So if I buy an i-bond before the end of January, I get the current 6.89% rate until July, no matter what. Then, suppose the rate goes to 0.4% in July, and I surrender the thing as early as I can, in January 2024. I've still earned about 3.6% for the year, only about a 1% below regular 1-year Treasuries. But that's a worst-case scenario.

Do I have this right ?
Not sure if you computed the penalty in your calculation, but you would lose the last 3 months of interest as well (.4% in your example)
I didn't think about that, but it'd be about 0.1% (0.4% over 3 months), so not much difference.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by TwstdSista »

infotrader wrote: Wed Jan 25, 2023 7:05 pm .....
I see, does that mean: if I buy it in April, if the rate stays the same, I can have 6 months of 6.89% and 6 more months of whatever is announced is April?If it drops to 0.4, I just don't buy it at all.
Correct (except that the next rate will be officially announced in May, we can just make an educated guess in April).
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Post by Nohbdy »

I’m hoping for some clarification regarding the I-bond education specifics.

https://www.treasurydirect.gov/savings- ... education/

Say I have an I-bond that I bought for $1k. It has earned $100 interest. We are under the income threshold (HHI around $140k). My spouse takes a class at a qualifying institution which costs $100. If we redeem the I-bond for $1100, is it tax free?

In other words, does the education expense offset the interest, or does the entire I-bond need to be applied to education expenses?

Thanks.
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Post by HueyLD »

Nohbdy wrote: Fri Jan 27, 2023 11:54 am I’m hoping for some clarification regarding the I-bond education specifics.

https://www.treasurydirect.gov/savings- ... education/

Say I have an I-bond that I bought for $1k. It has earned $100 interest. We are under the income threshold (HHI around $140k). My spouse takes a class at a qualifying institution which costs $100. If we redeem the I-bond for $1100, is it tax free?

In other words, does the education expense offset the interest, or does the entire I-bond need to be applied to education expenses?

Thanks.
No, she cannot use I bonds for merely taking a class. See this section in IRS Pub 970:

“ Qualified U.S. savings bonds.
…….
Qualified education expenses.

These include the following items you pay for either yourself, your spouse, or a dependent.

Tuition and fees required to enroll at or attend an eligible educational institution. Qualified education expenses don't include expenses for room and board or for courses involving sports, games, or hobbies that aren't part of a degree or certificate-granting program.”

However, she may be eligible for the “Lifetime Learning Credit.”
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Post by ResearchMed »

HueyLD wrote: Fri Jan 27, 2023 12:34 pm Tuition and fees required to enroll at or attend an eligible educational institution. Qualified education expenses don't include expenses for room and board or for courses involving sports, games, or hobbies that aren't part of a degree or certificate-granting program.”

However, she may be eligible for the “Lifetime Learning Credit.”
[emphasis added]


Given that these rules specifically call out/exclude courses for things like "sports, games, or hobbies", I would interpret the "part of a degree or certificate-granting program" as referring to the courses themselves, not whether the student is specifically enrolled in a particular program at "an eligible educational institution".
... unless there are other rules/wording that makes it more clear.

Part time enrollment in courses that are eligible for credit towards a degree don't count? They might be transferred as credit elsewhere, perhaps. Otherwise, it almost suggests that if one doesn't complete a degree or certification program, the tuition money wouldn't have been tax deductible...

That is, are the *courses* included as part of a degree or certificate-granting program?
Could those credits be used in the future for a degree, perhaps at that program, or elsewhere? Are they valid "educational courses" that could be used towards a degree or certificate?

Needless to say, I don't make the rules and I certainly don't enforce them.
I would consider these eligible without more specific directives that indicate otherwise, and wait to be challenged.

RM
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Nohbdy
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by Nohbdy »

ResearchMed wrote: Fri Jan 27, 2023 2:14 pm
HueyLD wrote: Fri Jan 27, 2023 12:34 pm Tuition and fees required to enroll at or attend an eligible educational institution. Qualified education expenses don't include expenses for room and board or for courses involving sports, games, or hobbies that aren't part of a degree or certificate-granting program.”

However, she may be eligible for the “Lifetime Learning Credit.”
[emphasis added]


Given that these rules specifically call out/exclude courses for things like "sports, games, or hobbies", I would interpret the "part of a degree or certificate-granting program" as referring to the courses themselves, not whether the student is specifically enrolled in a particular program at "an eligible educational institution".
... unless there are other rules/wording that makes it more clear.

Part time enrollment in courses that are eligible for credit towards a degree don't count? They might be transferred as credit elsewhere, perhaps. Otherwise, it almost suggests that if one doesn't complete a degree or certification program, the tuition money wouldn't have been tax deductible...

That is, are the *courses* included as part of a degree or certificate-granting program?
Could those credits be used in the future for a degree, perhaps at that program, or elsewhere? Are they valid "educational courses" that could be used towards a degree or certificate?

Needless to say, I don't make the rules and I certainly don't enforce them.
I would consider these eligible without more specific directives that indicate otherwise, and wait to be challenged.

RM
Thanks for the dialogue. This isn’t a recreational hobby thing.

The class would apply to her job as a part time educator as continuing education. Her employer would not reimburse, but they track it as a criteria for pay increases and other opportunities. It is very possible that she may apply this coursework towards a credential at some point, but we are not committing to that.
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Re: I Bonds Mega Thread (I Bond Heads Rejoice!)

Post by grunderson »

Just bought half. Worst case scenario I pull out in 11 months at 3.645% avg. APR (3 month penalty being negligible at 0.4%) but I mostly plan for it to be a long-term store of value. The sooner, the better in that regard. I'm ok with 0.4% next cycle, so no point waiting.

Plan to fill up in May if the fixed rate is high or CPI somehow rears back up.

Most of my cash is in money markets however, which imo is a better deal currently at 4% fully liquid. We'll see how long that lasts though.
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