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March 06 2013

HOPE (and Uncle Sam) Help You Save

As tax season swings into high gear, we wanted remind to members at HOPE Financial Dignity Centers of another way they can save during tax season.

Your tax refund is likely to be one of the biggest paydays you will get this year. There are many benefits to saving at least part of your refund, and sometimes you can get additional perks if you save in specific ways.

Taxpayers can buy paper U.S. Treasury Series I Bonds with their annual tax refund in amounts ranging from $50 to $5,000. 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.

If so, consider a convenient savings option offered by the U.S. Department of the Treasury. Taxpayers can buy paper Series I Bonds, in amounts ranging from $50 to $5,000, with their annual tax refund. TreasuryDirect online account holders may deposit all or part of their tax refunds into their TreasuryDirect accounts. Each new tax season is an opportunity to build savings to meet your goals; the average annual tax refund of $3,000 can compound over time when invested in savings bonds—an affordable and safe way to help your money grow for the future.

Follow these steps to use your tax refund to buy savings bonds:

1. Fill Out IRS Form 8888 – Complete this form to designate an amount to buy paper Series I Savings Bonds or to deposit into your online 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 accountThe Treasury Department offers helpful resources, such as a tip sheet and guided tour, to walk you through setting up a TreasuryDirect account at 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. First, use Form 8888 to make a deposit into your TreasuryDirect account. Then, use your TreasuryDirect account to make a gift of this deposit. A tip sheetdemo and video about giving savings bonds as gifts are available on the Ready.Save.Grow. website. You also can find information there about setting up a minor-linked TreasuryDirect account in your child’s name, to efficiently give savings bonds to your child using your tax refund.

To learn more about opening a TreasuryDirect account or buying savings bonds, visit theReady.Save.Grow. website at www.treasurydirect.gov/readysavegrow