Gifting US Treasury Bonds To Lock In Current Rates Beyond $10,000 Limit (I Bonds)

Reader C tips us off to a loophole which allows locking in more than $10,000 at the current high 7.12% I Bonds interest rate via the bond gifting system. It only works for who have a partner or friend to work with.

READ FIRST: US Treasury Bonds Rate Set To 7.12% (I Bonds)

You can gift someone else I Bonds with no purchase limit (link). While the recipient can only buy/receive $10,000 in a calendar year, using the gifting option locks in the current interest rate for whenever the recipient will eventually get the funds. Until that times it sits in your ‘gift box’.

For example: Jane and Dave are a married couple with shared finances. Each of them has already bought $10,000 in I Bonds for 2022. Jane can buy an additional $10,000 (or whatever amount) during March 2022, with the gift being fully executed to Dave in January 2023. Since Jane bought the I Bonds during March 2022, the bonds will begin accruing interest at the March 2022 rate and the 12-month lock-up period will be calculated based on the March 2022 date.

Dave can also do the same and buy $10,000 in bond gifts in March 2022 which will be given to Jane in January 2023.

You probably don’t want to buy huge volumes of gifts since it’ll then take years before the recipient will be able to receive the gift and break the bond since the recipient can only get $10,000 per year. In all likelihood the bond rates will go way down in the coming years, and you’ll have to keep the funds locked into I Bonds at the low rate until you slowly execute the gifts $10,000 per year.

But buying an extra $10,000 to lock in the current rate and to execute the gift in 2023 sounds like an interesting idea. (Even buying $20,000 for your 2023 and 2024 allotment makes sense to me, but there might be an additional tax Form 709 to fill out if you are doing with this with anyone other than your spouse.)

Important Note: You can only gift or receive an I Bonds gift to/from your personal I Bonds account. It does not work with I Bond business accounts or trusts.

Here’s a how-to from Treasury Direct (pdf) on how to go about gifting I Bonds.

Before going the gifting route, there are more basic ways of increasing your threshold above $10,000:

  • Buy $10,000 for each person, e.g. two spouses can buy $10,000 for each and you can buy $10,000 for each child
  • Get $5,000 back in paper bonds as a tax overpayment refund
  • Buy $10,000 for each business entity EIN you own
  • Create a revocable living trust which allows buying an addition $10,000

Personally I did $20,000 between 2021 and 2022. I finally got around to opening a Treasury account in my business name and found it easier than anticipated. Maybe I’ll get another $5,000 in paper bonds from tax overpayment which would bring me up to $35,000 in I Bonds. I’m not planning on opening additional businesses, trusts, or going the gifting route, but I found the option intriguing and thought it worth sharing.

You can watch a video from Treasury Direct on how to buy I Bonds as gifts at this link.
    Chuck
  • On March 24, 2022, 13:00
Tags: bonds

View Comments (206)

  • Delivered first tranche of gifts yesterday, quick and easy process, bonds showed up immediately in the receiver's account. I delivered the full amount and the transaction details broke down the principal/interest amounts, so a partial delivery would probably get prorated principal as far as counting against the 10k limit. The original bond is gone from my gift box but I can still see all the details in History.

    Date: 01-01-2023
    Description: Full Gift Delivered
    Amount: $5,000.00
    ----
    Delivery Amount: $5,178.00
    Principal: $5,000.00
    Interest: $178.00

    Note, for anyone who has gifts to deliver/receive and is considering purchasing more bonds this year, it works out better to deliver the existing gifts and purchase new gifts rather than holding on to them and the receiver directly purchasing their own bonds. The delivered gifts would be redeemable this year, whereas in the second case nothing could be redeemed until 2024.

    • is treasydirect website is smart enough to enforce limits for sending gifts, buying for kids, etc.? if so, then I don't have to worry about buying over limits and worry about penalties.

      • Possibly...a buggy update last fall was blocking all purchases for being over the limit until they fixed it. Even if you do go over, there's no penalty other than having the transaction reversed and maybe having to wait to get your money back.

    • very useful. One question: I bought bonds in late December and since I had to hold onto them for 5 business days before they can be delivered, I was not able to send them by December 31. Now, when I they are delivered in January 2023, will this count toward my 2023 limit? or the limit has to do with WHEN you bought them rather than when you have them delivered.

  • One question: If I buy 10k gift for my wife on Jun 2022, and I am planning to send the gift on Jan 2023. When Jan 2023 comes, the 10k in the gift box has already gained some interest. Let’s say 10.1K.

    Will I be able to send the 10.1K to my wife on Jan2023, which seems to be over the annual limit?

    Or I can only gift her 10k on Jan 2023, the 0.1k has to be delivered on Jan 2024?

    Or although the 10k will earn interest in the gift box for Jun 2022-Jan 2023, it will not shown the interest in the gift box, still shows 10k, only when I deliver it to my wife, her account will automatically shown the 10.1k on Jan 2023?

    • @guest_1474039 Late comment to this but there isn't an annual limit between spouses unless one isn't a US citizen. And even then, it's high limit,

    • I would expect that the $10K bond with the associated interest would transfer along with it. Remember that you are transferring the face value of the bond which is what counts and not the total amount.

    • It doesn't matter how much interest a gift bond has earned, delivering it will only count as 10k against her limit

    • In other words, is the gift option annual limit is based on the purchase value or current value?

  • Can you make gifts to minors? I just made the purchase and checked the Gift Box for custodial account. It says it is not available for this type of account. I hope I am able to access this money in 2023...Anyone experience this?

    • Yeah, you should be able to...make sure you are in your main account and not in the minor's MLA...

  • Does the 12-month holding period start from when you buy it or when the gift is received?

  • I am trying to make sure I do this right to bypass the $10k limit and gifting. So on the purchase page, under "Purchase frequency"/"Schedule single purchase for", do I put today's date or Jan 1, 2023?

    • Today's, and make sure the registration you're using has the gift box checked. If you haven't purchased gifts before, I found it easier to create the registrations beforehand so you could just use the dropdown box to select one, rather than creating it on the fly during the purchase.

      • When should I deliver the gift purchase to the recipent (gift is for 2023, and she already purchased it this year)? Does the system automatically know this gift is for 2023?

        • No, the gift will sit in your gift box until whenever you decide to deliver it...could be as early as Jan 1.

  • Hi. Would you please update the link for: Here’s a how-to from Treasury Direct (pdf) on how to go about gifting I Bonds?

  • Gifting US Treasury Bonds seem to counted as the recipient's annual limit now. I got an error message, "Annual limit exceeded. Please edit the purchase amount or edit your pending purchases under ManageDirect, if applicable, and try again."

  • Already at 6.12% for the next I Bond Rate come Nov. 1st. Might want to start stocking up for 2024 gift purchases...

    The June inflation report is the third in a six-month string — March to September — that will determine the I Bond’s new variable rate, which will be reset November 1.

    After three months, inflation has increased 3.06%, which would translate to a variable rate of 6.12%.

    But three months remain, and a lot can happen in three months, especially summer months when inflation is very hard to predict. The I Bond’s current variable rate is 9.62%.

  • Its almost the end of June, half way point for the year and inflation does not look like going down anytime soon. So it is possible that 2023 interest rates could be higher for i-bonds (say for example 12%). In which case would buying now to gift to P2 be a good strategy? Just thinking aloud....i-bond rate minus 3 months penalty is still better than any 1 year CD. So if you have 10K to put in a CD or savings might instead buy the i-bond gift now so it starts earning the interest which would be better than stashing it in a high yield account earning say 4% and then buying the 2023 ibond quota at a potentially 12% rate....Also buying now has the advantage of being able to cash out July 2023 versus Jan 2024 cashout for Jan 2023 purchases.

    • @guest_1399162 @guest_1353028 Thanks for the responses. I think I overlooked one fact which is that we are not "locking" the rate in now - unlike a CD. If the rate goes up the bond I purchase today will get the higher rate in November and beyond in addition to the current interest starting from today. So its probably good to buy now if I have the money now than to wait for a potentially better rate in Nov or in 2023. Basically nothing really lost by buying now versus waiting. In fact better to buy now so that is starts earning interest immediately even if that means I wont be able to buy any in 2023 at all.

    • I think the rate could stay close to 7-9% but don't think the renewal will be higher with the Fed tightening. Might as well wait to buy more until end of October at this point imo.

    • It doesn't go by calendar year (May/November resets). We're at 2 months of dates so far for the next rate reset.

      But I agree, the current rate plus a decent rate, if the inflation rate stays high, in November will be better than any CD.

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