U.S. savings bonds

You Can Use Your Tax Refund to Buy I Bonds, but Should You?

You can buy up to $10,000 in electronic I bonds per person in a calendar year, with an online account at TreasuryDirect.gov. Plus, you can buy up to $5,000 more in paper bonds per tax return, using your federal income tax refund. (A couple filing a joint return can buy up to $25,000 per year.) You can’t redeem the bonds for at least a year, and if you sell before five years, you’ll forfeit the last three months of interest.

People seeking higher yields in the short term can do better, Mr. Keil said. Twelve-month C.D.s, for example, are available with rates of 4.5 percent or higher. Also, he said, some U.S. Treasury bills, short-term debt issued by the government, are paying around 5 percent, and there are no limits on the amount you can buy.

“If you’re a shorter-term investor,” he said, “ you may be better off with Treasury bills.”

You can buy bills via TreasuryDirect or through a brokerage, although a brokerage will probably charge a commission or fee.

Here are some questions and answers about tax-time I bonds:

File the Internal Revenue Service’s Form 8888 with your tax return to buy paper I bonds. (Some people like to give paper bonds as gifts, and the only way to get them is via a tax refund.) The bonds will be mailed to you when the I.R.S. processes your return. According to TreasuryDirect, the issue date on your bonds — which determines their interest rate — will be the first day of the month in which Treasury’s service center receives payment from the I.R.S. So if the center receives your order anytime in April, the issue date will be April 1 — in time to receive the current annualized rate of 6.89 percent.

The tax filing deadline is April 18, but Mr. Keil advised submitting your return by April 1 if you want to buy I bonds, to make sure that you get the current rate. The I.R.S., which has struggled since the depths of the pandemic with slow processing of paper tax returns, says most returns filed electronically will receive refunds in less than three weeks.

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