Old Annual Purchase Limits
Purchase limits have been in place since 1941 when only Series E bonds were available. The most restrictive limit for those bonds—$3,750 annually—was in place from 1941 through 1947. The most generous limit was $30,000 for electronic Series EE and Series I bonds from 2003 through 2007. The U.S. Treasury Department used to set the Series I savings bond purchase limits based on the way you bought your bonds. You could buy up to $10,000 in Series I savings bonds, but no more than $5,000 could be in the form of paper bonds. The other $5,000 had to be digital bonds registered through the TreasuryDirect website. The policy changed on Jan. 1, 2012 when the Treasury Department started prohibiting financial institutions from selling paper savings bonds.
2022 Annual Purchase Limits
As of October 2022, each individual entity can purchase up to $10,000 worth of Series I bonds in a year. All bonds must be registered electronically through TreasuryDirect. In addition to this limit for electronic bond purchase, you can buy up to $5,000 worth of paper bonds using your federal income tax refund. To buy paper bonds, you’d need to submit Form 8888 with your tax return. The IRS effectively takes care of registering them for you. So the $25,000 annual purchase limit breaks down like this:
$10,000 in electronic Series I bonds purchased online, plus$5,000 in paper Series I bonds purchased with your tax refund, plus$10,000 in electronic Series EE bonds purchased online
Getting Around the Annual Purchase Limits
One problem with the savings bonds program is that it’s difficult for high-income families to invest a large percentage of their earnings in savings bonds due to these limits. But there are some loopholes. The limits also fall well below the gift tax exclusion—$16,000 per person per year ($32,000 for married couple) in 2022, increasing to $17,000 ($34,000 for married couples) in 2023. So you and your spouse could each purchase $10,000 worth of Series I savings bonds as gifts for each of your children, effectively transferring $20,000 to each of them without unpleasant gift tax consequences every year.
Series I Bonds Are Irrevocable Gifts
Series I savings bonds that you buy for minors through a custodial account with TreasuryDirect are irrevocable gifts. In other words, you can’t take the money back even if you use it on things that you think are justified, such as medical expenses. You could end up facing a civil lawsuit if your child decides to sue you for restitution.
Entity Accounts Can Increase Purchase Limits
Another technique to increase the purchase limits on Series I savings bonds is to open TreasuryDirect accounts in the name of your family business, partnership, limited liability company, or other qualified entity. But some restrictions apply.
