What Is the Annual Limit on Purchasing Series I Savings Bonds?
Series I savings bonds offer significant advantages to investors, and the United States Government limits the total value of these bonds that you can purchase each year. The limits are just high enough that you can take advantage of these potentially great securities, particularly if you're married.
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 Old Annual Purchase Limits
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.
2020 Annual Purchase Limits
The policy changed on Jan. 1, 2012 when the Treasury Department started prohibiting financial institutions from selling paper savings bonds.
Investors have enjoyed an overall $30,000 annual limit on Series I savings bond purchases since that time. All bonds must be registered electronically through TreasuryDirect, but this doesn't mean that you can no longer purchase paper bonds. You can still buy them with your federal tax refund by submitting Form 8888 with your tax return. The IRS effectively takes care of registering them for you.
The good news here is that the $10,000 limit for electronic bonds and the $5,000 limit for paper bonds apply separately.
The Series I savings bond annual purchase limit is also in addition to the $10,000 Series EE savings bond annual purchase limit. In other words, you can put money into each of the two types of savings bonds annually and take advantage of both.
So the $30,000 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, plus
- $5,000 in paper Series EE bonds purchased with your tax refund
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.
These limits also fall well below the gift tax exclusion—$15,000 per person per year per spouse in 2019 and 2020—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.
This allows high-income families to invest much larger amounts in Series I savings bonds without hitting the annual purchase limits. They're effectively giving gifts, not investing in bonds for themselves.
These 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 in jail or 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. These types of accounts have been permitted since April 2009.
These rules are always in flux, so always check with a qualified tax expert in whom you have trust and confidence.
This means that you can purchase Series I bonds for you, your spouse, and your children, then turn around and buy more Series I bonds through a family-controlled limited liability company or partnership. The annual purchase limits are applied to the recipient of the bonds, not the giver.
TreasuryDirect. "Treasury Department Sets Online Savings Bond Annual Purchase Limit at $10,000 per Series." Accessed March 15, 2020.
TreasuryDirect. "Series I Savings Bonds." Accessed March 15, 2020.
IRS. "Using Your Income Tax Refund to Save by Buying U.S. Savings Bonds." Accessed March 15, 2020.
TreasuryDirect. "Buying Series I Savings Bonds." Accessed March 15, 2020.
IRS. "Frequently Asked Questions on Gift Taxes." Accessed March 15, 2020.