Pay Tax yearly on I-bond Interest

[Sunset]

I decided to pay the interest on our I-bonds each year, since 2022 was a low interest year this will make up for some of it, and avoid the big interest amount which happens when postponing the interest.

Treasury Direct says log in to see the value, but it's the value TODAY, I can't see the value on Dec 31st 2022.

Here is the problem, I didn't log into the account and read the accumulated interest until Jan 30, 2023. Today I logged in and it was higher, so it goes up each month (sometime).

So I don't know what the accumulated interest is for 2021 and 2022.

Treasury Direct has a calculator only for paper bonds.

I emailed them, but they have an automated reply saying they are too busy (probably everyone phoning to ask this question )

Anyone have a solution , or online calculator ?

 

[Bigdawg]

"When must I report the interest?
You have a choice. You can

put off (defer) reporting the interest until you file a federal income tax return for the year in which you actually get the interest, or
report the interest each year even though you don't actually get the interest then"-from treasury direct-

You can wait until you cash them out.

 

[cbo111]

My plan is for all I-bonds to roll to relatives designated in my trust. Thus, no interaction with the tax man, at least during my lifetime.

 

[ivinsfan]

My plan is for all I-bonds to roll to relatives designated in my trust. Thus, no interaction with the tax man, at least during my lifetime.

When this happens your relative pay the tax due at their tax rate? Or the trust pays the taxes...no stepped up basis?

 

[gear2th]

I use the Treasury Direct calculator even though I have only electronic bonds. I have to break my $10K bonds into two $5K bonds. I can verify that it works correctly because it agrees with my TD account for the current value.

 

[jevans04]

This is a link to a spreadsheet for an I-bond calculator. You just need to enter the month/year of purchase and the purchase amount for each bond. It will calculate the value of each bond for every month for what ever year you select.

I Bond Portfolio Calculator

 

[audreyh1]

Too hard to track for me. I’ll just take the occasional tax hit. Only our 2003 IBonds are going to be the biggies, back when you had higher fixed rates and $30K per person annual limits.

 

[Sunset]

Originally I was going to just claim the interest when cashing them.

However, I can see for tax year 2022, that our interest earned dropped a bit, and I didn't do as much in Roth conversions as I could.

Therefore I can claim the I-bond interest now, to fill some of that space, and thereby claim less later, when we collect SS and RMD's (if the I-bonds last that long).

 

[Sunset]

I use the Treasury Direct calculator even though I have only electronic bonds. I have to break my $10K bonds into two $5K bonds. I can verify that it works correctly because it agrees with my TD account for the current value.

Great, you are correct.
Breaking a 10K bond purchase into 5K (and doubling it) gets the correct number for whatever current date you enter.
And I also checked against my account value current date.

 

[racy]

Here's an article on how the interest is calculated: https://tipswatch.com/2022/09/06/lets-try-to-clarify-how-an-i-bonds-interest-is-calculated/

 

[joesxm3]

Originally I was going to just claim the interest when cashing them.

However, I can see for tax year 2022, that our interest earned dropped a bit, and I didn't do as much in Roth conversions as I could.

Therefore I can claim the I-bond interest now, to fill some of that space, and thereby claim less later, when we collect SS and RMD's (if the I-bonds last that long).

Check the rules. I think if you want to pay interest annually you have to pay all previous interest then continue paying it every year going forward.

 

[Sunset]

Check the rules. I think if you want to pay interest annually you have to pay all previous interest then continue paying it every year going forward.

Yes, which fits nicely for us, as 2022 was a low interest year, so all this interest will fill up some of the missing income taxwise.

I only wish I had known about I-bonds before so that I could have a larger lump to declare, although I'm sure some folks have such a large lump they are waiting as the lump will push them into higher brackets, IRMMA, etc..

 

[Sunset]

I will do our tax return, see what the numbers are, and at that point decide to add in the I-bond interest or not.
I'm tending toward doing it, but having the actual numbers will be the deciding factor.