Series I Savings Bond Annual Purchase Limits
The United States Government limits the total value of the Series I savings bonds you can purchase each year due to the significant advantages they offer investors. Unless you're a member of the capitalist class, if you are married, the limits are high enough that you can take advantage of these potentially great securities. To help you better understand these limits and why they are put in place, let's take a look at the specifics.
The Old Series I Savings Bond Annual Purchase Limits
Prior to the move to digital bond issuance (paper Series I savings bonds are no longer offered as the world has moved to electronic record storage), the Treasury Department inexplicably made things complicated by setting the Series I savings bond purchase limits based on the way you bought your bonds. In those days, you were allowed to buy up to $10,000 in Series I savings bonds, but no more than $5,000 could be in the form of the paper bonds and $5,000 in the digital bonds registered through the TreasuryDirect website. This made keeping track of your paperwork a bit of a hassle. Thank goodness, that is no longer the case.
The New Series I Savings Bond Annual Purchase Limits
Since the current policy went in effect all the way back on January 1st, 2012, investors can enjoy a $10,000 annual limit on Series I savings bond purchases, all of which must register electronically through TreasuryDirect.
Note that this $10,000 Series I savings bond annual purchase limit is in addition to the $10,000 Series EE savings bond annual purchase limit. In other words, you can take advantage of both, putting a total of $20,000 into the two types of savings bonds.
Getting Around the Series I Savings Bond Annual Purchase Limits
One problem with the savings bonds program is it is difficult for high-income families to invest a large percentage of their earnings in savings bonds due to the annual purchase limits. If you are married and have children, you and your spouse are both eligible to purchase the bonds, giving you the ability to invest up to $20,000 per year in the Series I savings bonds (or $40,000 in total if you opt to also put $20,000 in the Series EE savings bonds). These limits also fall well below the current gift tax exemption, so both you and your spouse could purchase $10,000 each worth of Series I savings bonds for all of your children, effectively transferring $20,000 to them without any tax consequences every year. This allows high-income families to effectively invest much larger amounts in Series I savings bonds without hitting the annual purchase limits.
The catch? Series I savings bonds you buy for minors through a custodial account with TreasuryDirect are irrevocable gifts. You can't take the money back even if you use it on things you think are justified. If you do, you could end up in jail or facing a civil lawsuit, which you will most likely lose if your child decides to sue you for restitution, even if you spent the money on their medical expenses!
Using Entity Accounts to Increase Series I Savings Bonds 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. As you learned in Series I Savings Bonds Eligibility Requirements, these types of accounts have been permitted since April 2009. That means that you could buy Series I savings for you, your spouse, and your children, and then turn around and buy more I bonds through a family-controlled limited liability company or partnership. Of course, the rules are always in flux and you should check with a qualified tax expert in whom you have trust and confidence.
More About the Series I Savings Bond
You can read our Guide to Investing in Series I Savings Bonds. This will walk you through tons of information about savings bonds, especially the series I savings bond, including how you can add them to your portfolio, annual purchase limits, ownership requirements, tax benefits, and much more.