Ibonds as a gift to child
Hi – I have some I bonds that I purchased back when they were hot. You were also saying they were a good deal at the time.
My financial advisor told me that I should have paid a tax on the bond each year. When I look at different web sites including Intuit, it says you could either pay the tax yearly or when you sell.
This came up when I asked him if I could transfer my bonds to my grandchildren.
Can you help clear this up?
Terry Says
There’s no reason to pay the tax until you cash the bonds in at maturity. In fact, it creates a sort of tax nightmare to do it that way. And they only reason is to keep your income low so it doesn’t impact your Medicare premiums if you cash in a bond and record all the interest as income in one year in the future.
As for gifting an I-bond, read the instructions here:
https://www.treasurydirect.gov/savings-bonds/gift-a-bond/
Basically, both you and the recipient must have a TreasuryDirect account. A child under 18 can only have an account if the child’s parent or other adult custodian has a TreasuryDirect account and sets up a linked account for the child.
It’s probably too big a hassle to gift that money. Instead, open a 529 college savings account and make your gift to that fund.
