(BPT) - Expecting a tax refund this tax season? If so, you may be interested in a convenient savings option offered by the U.S. Department of the Treasury. Taxpayers may buy paper Series I Savings Bonds, in amounts ranging from $50 to $5,000, with their annual tax refund by completing the “Allocation of Refund (Including Savings Bond Purchases)” IRS Form 8888. TreasuryDirect online account holders may deposit all or part of their tax refunds into their TreasuryDirect accounts.

“Each new tax season gives people a chance to build their savings,” says Jerry Kelly, national director of the Treasury Department’s Ready.Save.Grow. campaign. “The average annual tax refund of $3,000 can compound over time when invested in savings bonds. I encourage tax refund recipients to learn more about the benefits of savings bonds as they plan for long-term savings goals.”

To use your tax refund this year to buy savings bonds, 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, electronic savings bonds are even easier to manage with an online TreasuryDirect account. For instructions on how to set up a TreasuryDirect account, helpful tools including a tip sheet and guided tour can be found on www.treasurydirect.gov/readysavegrow.

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, add the recipient's name as a “co-owner or beneficiary” on Form 8888. The bonds will be mailed to you.

4. Give electronic savings bonds as a gift with tax refund dollars – You may use your tax refund to give electronic 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, which are available on www.treasurydirect.gov/readysavegrow. To efficiently gift savings bonds to your child using your tax refund, set up a minor-linked TreasuryDirect account in your child’s name.

Why Series I Savings Bonds?

Series I Savings Bonds currently offer an interest rate of 1.76 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.

Series I Bonds are long-term savings instruments that can help support a home purchase, retirement, college savings 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 Bonds Calculator, accessible on www.treasurydirect.gov, 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 payday you can automatically contribute to your TreasuryDirect account and begin building your nest egg. To learn more about payroll direct deposit and other 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.