Series I bond

Forum|Forum|3 years ago
October 26, 2022
2 replies
30 views

Hi! My wife and I were exploring investing some funds in a Series I bond for our children but I wasn't sure from a tax liability stand point if it were better to buy the bonds using our SS# or our childrens SS#

MariaDG1

Level 5

Hello arohrer24! Thanks for participating in our event today. This a fantastic question. I-bonds can be a smart choice, especially when inflation is problematic as it is at the moment.

The presumption, typically, is that you have significantly more income than your minor child, and are probably in a higher tax bracket. If that's the case, then there can be distinct advantages to purchasing the bond in your child's name. When your child cashes out the bond, they will be taxed on the growth. For a minor child, the first $1100 will be tax free, and the next $1100 will be taxed at the child's rate, which will quite likely be 10% assuming they don't have much other income.

Of course, if you intend to leave the bond until it matures fully at 30 years, that won't apply. Who knows what tax bracket your child will be in at that point.

Hope that helps!

SuziM

Level 10

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