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Income Tax Refund -> I Bonds
Old 01-11-2022, 08:17 PM   #1
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Income Tax Refund -> I Bonds

How many folks are (or already have) going to over-pay their income taxes this year simply to acquire another $5K in I-Bonds? I believe that I am going to do that.

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Old 01-11-2022, 08:28 PM   #2
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How many folks are (or already have) going to over-pay their income taxes this year simply to acquire another $5K in I-Bonds? I believe that I am going to do that.



dave

I did. Not losing much interest if it were otherwise in a savings account.
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Old 01-11-2022, 08:28 PM   #3
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I had no idea what you were talking about, so I looked it up. Didn't know about this "trick" to buy another $5K in I bonds if you have a tax refund to cover the purchase. Great info.
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Old 01-11-2022, 08:30 PM   #4
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For what, to gain maybe $35 a year?
File under just because you can, doesn’t mean you should.
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Old 01-11-2022, 08:38 PM   #5
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For what, to gain maybe $35 a year?
File under just because you can, doesnít mean you should.

Assuming the May 1 rate is the same as the current rate:
$5,000 x 7.12% = $356
And thatís not compounded.
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Old 01-11-2022, 08:42 PM   #6
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Assuming the May 1 rate is the same as the current rate:
$5,000 x 7.12% = $356
And thatís not compounded.
Math is hard for me. One decimal and it changes everything.
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Old 01-11-2022, 08:52 PM   #7
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And no state tax!
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Old 01-12-2022, 06:45 AM   #8
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So, what's the deal? If you have a refund, you can get up to $5K in I-Bonds? Do they send you paper bonds or do you set up an account?
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Old 01-12-2022, 07:05 AM   #9
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If math is hard for anyone else, I'd suggest Vanguard's nest egg calculator. It only has the minimum number of moving parts: stock/bond allocation, starting amount and spending, and number of years.
https://www.vanguard.com/nesteggcalculator

If you want a finer level of detail, you can use filecalc afterwards. But I learned enough from just using Vanguard's, like 3% vs 4% withdrawal rate matters much more than 40% or 60% equities.
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Old 01-12-2022, 07:18 AM   #10
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So, what's the deal? If you have a refund, you can get up to $5K in I-Bonds? Do they send you paper bonds or do you set up an account?
The links below pretty much tell the story.

https://www.irs.gov/refunds/using-yo...-savings-bonds

https://www.treasurydirect.gov/indiv...taxfeature.htm

https://www.treasurydirect.gov/indiv...efund_1208.htm

I have run into 2 'fine print' things in what I have read.

1) If the IRS makes an adjustment in your refund downward (even by $1) none of your refund will go to I bonds.

2) It is not clear to me that any excess refund (beyond that designated to I Bonds) can be applied to your 2022 estimated payments.

I would also comment that somewhere in there is the statement that you can do that with state tax refunds as well. I have no knowledge of this.

dave
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Old 01-12-2022, 04:06 PM   #11
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Assuming the May 1 rate is the same as the current rate:
$5,000 x 7.12% = $356
And thatís not compounded.
This is assuming you get $5k I bond in April'22 so you have 2 six month periods @7.12%.

Six months (6/12m = 1/2 yr) at @7.12% x $5,00 x 2 six month periods.
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Old 01-12-2022, 04:16 PM   #12
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Originally Posted by oldtimer
This is assuming you get $5k I bond in April'22 so you have 2 six month periods @7.12%.

Six months (6/12m = 1/2 yr) at @7.12% x $5,00 x 2 six month periods.

I think he got my point that he made a math error.
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Old 01-12-2022, 05:19 PM   #13
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At this point my 2021 withholding is about $100 more than my estimate of my 2021 tax so I'm not at all worried about underpayment penalties.

My plan is to complete my 2021 return in February 2022 and verify that I am slightly overpaid, then make a 2021 estimated payment of $5,000, then once that estimated payment clears my bank I'll efile my return with $5,000 of my refund being used to purchase $5,000 of i-bonds and any remainder applied to my 2022 taxes.
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Old 01-13-2022, 12:52 AM   #14
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I did. Not losing much interest if it were otherwise in a savings account.
+1
Same reasoning.
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Old 01-13-2022, 11:18 AM   #15
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My plan mirrors pb4uski post #13
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