Buy I Bonds as a Gift: What Works and What Doesn’t

My previous posts covered buying I Bonds in a trust, , and buying I Bonds for your business. Let’s look at another way to buy I Bonds this time: buying them as a gift. For background on I Bonds in general, please read How To Buy I Bonds.

Table of ContentsGift Box and DeliveryPurchase LimitInterest and Holding PeriodGift to KidsWhen Gifts Are Useful and When They Are NotOfficial Walkthrough VideosGift Box and Delivery

You buy I Bonds as a gift in two stages: buying and delivering.

You must give the recipient’s name and Social Security Number in the buying stage. Only a personal account can buy or receive gifts. A trust or a business can neither buy a gift nor receive a gift.

The bonds you buy as a gift go into a “gift box.” You can’t cash out the bonds stored in your gift box. This is analogous to you going to a store and bringing back the gift to your closet. The gift already has the recipient’s name on it. You can’t steal the gift for yourself.

The recipient doesn’t know you bought a gift for them until you deliver the gift to them. This is analogous to bringing the gift from your closet when you visit family. You’ll need the recipient’s account number to deliver a gift.

I Bonds stored in your gift box are in limbo. You can’t cash them out because they’re not yours. The recipient can’t cash them out either because they don’t have them yet.

There’s a minimum wait of five business days between buying and delivering to make sure your bank debit clears. There’s no maximum stay in the gift box. You can pre-purchase gifts and wait to deliver them at a much later time. You can also choose to deliver gifts in bits and pieces as opposed to in one lump sum.

Purchase Limit

Delivered gifts count toward the $10,000 annual purchase limit of the recipient in the year of delivery. You can still buy gifts for others even if you already bought the maximum for yourself.

You can buy a maximum of $10,000 for any recipient in one purchase but there’s no limit in how many recipients you buy for or how many times you can buy for the same recipient in any calendar year. If you’d like, you can buy $10,000 worth of I Bonds for each of your 20 family members or you can make 5 separate purchases of $10,000 each for the same family member, all in the same calendar year. The limit is in how much you can deliver to the same recipient in the same calendar year.

If the recipient also bought the maximum for themselves this year, delivering additional I Bonds to them will put them over their annual purchase limit. You’ll have to wait to deliver in a year they’re not buying the maximum themselves. If you bought more than $10,000 as gifts for the same recipient, you’ll have to wait to deliver the gifts across multiple years.

Interest and Holding Period

Interest and the holding period start in the month of your purchase. If you pre-purchase gifts and wait to deliver them to the recipient at a later time, bonds in the gift box still earn interest before delivery. The holding period for cashing out also starts right away. If five months have passed between the time of purchase and the time of delivery, the recipient only has to wait another seven months before they can cash out as opposed to the full 12 months for freshly purchased bonds.

Gift to Kids

It’s not necessary to buy as gifts for your own kids. As the parent, you can open a minor linked account in your account and buy directly in your kid’s name. See previous post .

Buying I Bonds as a gift works for a grandchild or a niece or a nephew. The child’s parent needs to open a minor linked account under the parent’s account and give you the child’s Social Security Number and account number.

When Gifts Are Useful and When They Are Not

If you’re thinking of “borrowing” other people’s names and Social Security Numbers to buy more I Bonds as gifts but keep the bonds for yourself, it doesn’t work. Only the named recipient can cash out the bonds. If you don’t deliver them, the bonds stay in your gift box, and neither you nor the specified recipient can cash them out. After you deliver the gift bonds, it’s the recipient’s money, and they can do whatever they want with the bonds.

If you’re thinking of letting others buy I Bonds as gifts for you to work around the $10,000 annual purchase limit, it doesn’t quite work either. Gifts delivered to you count toward your annual purchase limit. If you already bought your maximum for the year, having additional gift bonds delivered to you in the same calendar year will put you over the limit.

Buying I Bonds as a gift works when you want a family member to have some I Bonds but they don’t have spare cash. It works the same as giving them money and letting them buy themselves.

It also works to a limited extent if you think the high interest rates on I Bonds are only temporary. You can buy a gift for your spouse and hold it in your gift box. Have your spouse do the same for you. When interest rates drop and the two of you don’t buy I Bonds anymore, you can deliver the gift to each other. The older gift bonds earned the high interest rates in the years past and they have aged enough for immediate cashout. Because there’s a limit in how much you can deliver to the same person each year, don’t go overboard with this. If you hold $100,000 in the gift box and the interest rates are no longer competitive, those bonds will be in limbo for a long time while earning uncompetitive interest rates.

Official Walkthrough Videos

If you’re ready to buy I Bonds as a gift, please watch these walkthrough videos on the TreasuryDirect website:

Purchasing a Gift Bond – The video shows buying a Series EE bond. Make sure to select Series I when you’d like to buy I Bonds.

Delivering a Gift Bond – Remember to check with the recipient how much they bought or are planning to buy this year themselves.

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