Using Your Tax Refund for TreasuryDirect

You can have your tax refund directed to your TreasuryDirect account to use for Treasury security purchases. Note: this option will be discontinued January 1, 2025. See our FAQ.

You can request the IRS or your state tax department to deposit your tax return directly into your TreasuryDirect account where you can use the funds to purchase savings bonds or marketable Treasury securities. All you need to do is provide TreasuryDirect's routing number and your TreasuryDirect account number in the refund instructions on your tax return, before January 1, 2025.

On your tax return, enter:

• the TreasuryDirect routing number, 051736158, in the “Routing number” field.
• your TreasuryDirect account number in the “Account number” field.
• “Savings” as the account type.

Providing these instructions in the "refund" area on your tax return will direct your refund to the Zero-Percent C of I in your TreasuryDirect account where it will be available to fund the purchase of one or more Treasury securities.

You can also use your federal tax refund to purchase Series I savings bonds in paper form. Starting January 1, 2025, this option will be discontinued.

Don't have a TreasuryDirect account? ... open one now.

Purchase Limits

Are you confused about how much you're allowed to purchase in savings bonds or Treasury marketable securities each year? It's simple!

Savings Bonds

Different purchase limits apply for electronic savings bonds and paper savings bonds.

Electronic (TreasuryDirect)

Through your TreasuryDirect account - which is established using your name and social security number, bank information, driver’s license and e–mail address – you can invest in electronic savings bonds (also referred to as book–entry savings bonds) each calendar year by purchasing as much as:

• $10,000 in Series EE bonds, and
• $10,000 in Series I bonds.

Paper

Paper Series I savings bonds may be purchased only with your IRS tax refund. Starting January 1, 2025, this option will be discontinued. See our FAQ. For these bonds, the purchase limit per calendar year is:

• $5,000

Exceptions: Savings bonds you purchase as gifts aren’t included in your annual limit. The purchase amount of electronic savings bonds you transfer, deliver as gifts, or de-link to another TreasuryDirect account holder is applied to the annual purchase limit of the recipient. It is applied in the year the bonds are delivered to the recipient’s account.

Note: The three purchase limits above apply separately. That is, in a single calendar year you could buy $10,000 in electronic Series EE bonds, $10,000 in electronic Series I bonds, and $5,000 in paper Series I bonds.

Treasury Marketable Securities -- Bills, Notes, Bonds, Floating Rate Notes, and TIPS

The most important thing to remember about purchasing marketable bills, notes, bonds, Floating Rate Notes, or TIPS is that the limits are set for each auction, not by year. The limit for noncompetitive purchases is $10 million for each security type and term, for each auction. This limit applies regardless of whether you're buying a bill, note, bond, Floating Rate Note, or TIPS, and regardless of what method you use to make the purchase (TreasuryDirect, broker, or dealer).

In other words, you could invest as much as $10 million in each security listed below -- in every auction offering -- without violating the purchase limit. For example, you can purchase:

• $10 million each in 4-, 8-, 13-, 26-, and 52-week Treasury bills,
• $10 million each in 2-, 3-, 5-, 7-, and 10-year Treasury notes,
• $10 million in 30-year Treasury bonds,
• $10 million in 2-year Floating Rate Notes, and
• $10 million each in 5-, 10-, and 30-year Treasury TIPS.

Besides the maximum noncompetitive bid limit, we also have a household limit. This limit applies to a person, spouse and children under the age of 21 having a common address. These individuals within a household need to total their bids to make sure that their bids do not exceed the noncompetitive bid limits for each auction as stated above.

For example, in a Treasury bill auction, a husband, wife, an 18 year-old living at home and a 21 year-old living at home each placed a bid in the auction. The husband, wife and 18 year-old would not be allowed in total to bid over the maximum limit of $10 million. But, the 21 year-old living at home would be allowed to bid separately up to the maximum bid of $10 million.

Reinvestments in TreasuryDirect don't count toward the purchase limit. TreasuryDirect provides an option for automatic reinvestments. When making your original purchase of a bill, note, bond, or Floating Rate Note, you can schedule reinvestment of the security simply by completing the "Schedule Reinvestment" section on the BuyDirect® page.  See detailed instructions. The purchase limit does not apply in TreasuryDirect when a security is purchased in this way.

NOTE: At this time, TIPS can't be reinvested in TreasuryDirect.

Zero-Percent Certificate of Indebtedness (Zero-Percent C of I, or C of I)

A Zero-Percent C of I is a security that can be funded in your TreasuryDirect account and used to purchase other securities. It's issued daily with a one-day maturity that automatically rolls over at maturity - and continues to do so until the customer requests redemption. It does not earn interest. The purpose of a C of I is to accumulate funds for the purchase of another eligible security in the TreasuryDirect system.

A C of I may be funded in several ways:

• Payroll deduction,
• Depositing proceeds from your securities (interest, redemption, maturing proceeds), and
• Withdrawing funds from a designated bank account.

There is no limit to the amount that may be held in your C of I. However, only $1,000 may be withdrawn from a designated bank account for each transaction.

By remembering these simple rules, you should avoid exceeding any and all purchase limits.

Transferring Securities from Legacy Treasury Direct to TreasuryDirect

Have you wondered how to transfer your securities from Legacy Treasury Direct to TreasuryDirect? The process is simple.

Any security in Legacy Treasury Direct is eligible to be transferred – Treasury notes, Treasury bonds, or TIPS. You can send any of them to an account in TreasuryDirect, and it won't cost you anything.

Here’s how to make the transfer:

1. Open an account in TreasuryDirect. (If you already have an account in TreasuryDirect, you may skip this step.)
2. Complete FS Form 5179. In the form's section 3, check the box for “Transfer to an Established Online TreasuryDirect Account Number.” Your signature on this form must be certified. For details, see the form's instructions.
3. Mail your FS Form 5179 to the address shown on the form.

Take these three steps and you can begin enjoying TreasuryDirect, a system that's available online 24 hours a day, seven days a week.

Retirement Planning

Experts estimate you'll need 70-80 percent of your pre-retirement income—lower earners will need 90 percent or more—to maintain your standard of living when you stop working. This is based on the assumption that you'll cut out many of your current expenses, like commuting costs, when you retire.

When you use savings bonds during retirement, you can:

• Avoid dipping into your retirement accounts early by using your savings bonds instead.
• Defer paying taxes on interest your savings bonds earn. You can wait until you cash (redeem) your bonds or they mature, whichever comes first. If redemption or maturity occurs after you retire, you might pay less, as you might be in a lower tax bracket then.

Savings bonds are backed by the full faith and credit of the United States government.

If you don't know which savings bond is best for your needs, visit our I and EE Savings Bond comparison page.

Making Your Retirement Planning Easier with TreasuryDirect.

TreasuryDirect makes it easy for you to plan and manage your retirement savings electronically. You can:

• Purchase any amount of savings bonds from $25 to $10,000 per series — in penny increments.
• View your account online 24 hours a day, 7 days a week.
• Deposit the funds into your designated checking or savings account when you redeem your bonds.

Education Planning

Education Tax Exclusion

The education tax exclusion permits qualified taxpayers to exclude from their gross income all or part of the interest paid upon the redemption of eligible savings bonds, when the bond owner pays qualified higher education expenses at an eligible institution.

Who Can Take the Exclusion

You can take the exclusion if all five of the following apply:

• You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
• You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
• Your filing status is any status except married filing separately.
• Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
• You were 24 or older before your savings bonds were issued.

Savings Bonds That Qualify for the Exclusion

To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.

More Information

For more information on the exclusion, see IRS Form 8815.

To apply for the exclusion, attach IRS Form 8815 to IRS Form 1040 or IRS Form 1040-SR and send both to the Internal Revenue Service.

Tax Planning

Savings bonds offer many tax advantages:

• Interest on savings bonds is subject to taxes imposed under the Internal Revenue Code of 1986. The bonds are exempt from taxation by any State or political subdivision of a State, except for estate or inheritance taxes.
• The education tax exclusion permits qualified taxpayers to exclude from their gross income all or a portion of the interest paid upon the redemption of eligible Series EE and I Bonds issued after 1989. The bond owner must use the bonds to pay for qualified higher education expenses at an eligible institution. Find out more about Education Planning.
• Buy savings bonds in a child's name. If the child's interest is reported annually, taxes might be eliminated on interest earnings during years when the child's income is sufficiently low.
• When planning for retirement, keep in mind that you can cash savings bonds to supplement your retirement income and report the tax-deferred interest as income for that year, when you may be in a lower income tax bracket.

If you only look at the rate your savings bonds are earning, they may not seem like a competitive investment at first. But when you factor in all the tax advantages, your bonds are earning more than you think.

Reporting Interest

There are two ways you can report the interest your savings bonds earn.

• Annually.
• When you cash the savings bonds or when they reach final maturity, whichever comes first.

If you want to switch from deferred reporting to annual reporting of interest, you must do it for all your savings bonds. You must also report all interest earned up to the year of the change in reporting procedure. If you later wish to change from annual reporting to deferred reporting, either attach to your tax return a statement asking for this change or submit IRS Form 3115 (the fee for the form is waived in this case). See IRS Publication 550 for details.

Estate Planning

Savings bonds can be useful in estate planning because, on the death of the original bond owner, ownership goes to the co-owner or beneficiary, if the bond has either. A will is not needed.

It's important to register your bonds correctly. Registrations for Series EE and I Bonds, both electronic and paper bonds, can vary, so it's a good idea to find out how to register each type of bond. View information about registrations for EE and I Savings Bonds.

Trusts

A trust is a right of property, real or personal, held by one person appointed or required by law to administer a trust, for the benefit of another.

• Can be created for any purpose which is not illegal or against public policy.
• No limit to the number of trustees or the number of persons who may create a trust.
• Can be established by any organization or competent adult holding a legal title to property.
• A testamentary trust can be created under the will of a decedent.

The person who creates a trust is called the grantor, maker, donor, trustor, or settlor. The person charged with administering a trust is called the trustee. The party for whose benefit a trust is created, or who is to enjoy the income of the trust, is called the beneficiary or donee.

See information about trust registrations for electronic bonds.

Trust Instrument

A Trust Instrument is the document that sets out in writing the authority, duties, and rights of the parties involved. The instrument may be called an Agreement, Indenture, Declaration, or Deed. In the case of a testamentary trust, the trust instrument is the decedent's will.

Learn more about: