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Turn your tax refund into savings

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Posted: Tuesday, January 21, 2014 10:00 pm | Updated: 1:36 am, Sat May 24, 2014.

(BPT) - Millions of Americans get a refund on their taxes each year. If you are one of them, why not use part of your refund to save for the future with a Series I Savings Bond from the U.S. Department of the Treasury? You can invest as little as $50 in this affordable, safe and convenient savings option, which can help you meet your long-term savings goals and build a brighter future.

“Tax season can be a great time of year to build savings,” says Jerry Kelly, national director of the Treasury Department’s Ready. Save. Grow. campaign. “I encourage anyone who is due a tax refund to consider using part or all of their refund to grow their savings with U.S. Savings Bonds.”

If you would like to buy a savings bond with your tax refund, follow these steps:

1. Fill out Form 8888 – Complete this form to designate your desired dollar amount to buy paper Series I Savings Bonds or to deposit into your TreasuryDirect account.

2. Set up a TreasuryDirect Account – Although you can buy paper savings bonds with your tax refund, digital savings bonds are even easier to manage with an online TreasuryDirect account. For instructions on how to set up a TreasuryDirect account, visit www.treasurydirect.gov and click on the tip sheet and guided tour links.

3. Give paper savings bonds as a gift with tax refund dollars – You may use your tax refund to buy paper savings bonds as a gift to others. To do so, follow the specific instructions for Part II on Form 8888. The bonds will be mailed to you.

4. Buy digital savings bonds for yourself with tax refund dollars – Deposit an amount into your TreasuryDirect account by using Form 8888. Then access your TreasuryDirect account to buy savings bonds or other Treasury securities.

5. Give digital savings bonds as a gift with tax refund dollars – You may use your tax refund to give digital savings bonds as a gift to others. Deposit an amount into your TreasuryDirect account by using Form 8888. Then use your TreasuryDirect account to make a gift of this deposit. Resources that provide guidance on gifting savings bonds include a tip sheet, demo and video that can be found on www.treasurydirect.gov. To efficiently gift savings bonds to your child using your tax refund, open a TreasuryDirect account for your child within your own account.

Why Series I Savings Bonds?

Series I Savings Bonds currently offer an interest rate of 1.38 percent, and they’re exempt from state and local income taxes. What’s more, interest earnings may be exempt from federal income taxes when the earnings are used to pay for qualified higher education expenses.

I Bonds are long-term savings instruments that can help you save for a home, retirement, college tuition or other life goals. You must hold an I Bond for at least one year after it's issued, but it’s best to hold it for at least five years to avoid any early redemption penalty. To learn more about the value of savings bonds, the Treasury Department’s Savings Bond Calculator will come in handy.

Save with savings bonds year-round

U.S. Savings Bonds are a good investment at tax time – or anytime. Payroll direct deposit through your employer is a convenient option for building a regular savings habit. Every pay day you can automatically contribute to your TreasuryDirect account and build your nest egg. To learn more about payroll direct deposit and Treasury securities, go to the Ready.Save.Grow. website at www.treasurydirect.gov/readysavegrow.

The preceding information was provided by the U.S. Department of the Treasury, Bureau of the Public Debt.

TreasuryDirect is a registered mark of the U.S. Department of the Treasury. Ready.Save.Grow. is a service mark of the U.S. Department of the Treasury.

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