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You can claim the interest on an I bond tax-free if you use it for qualified education expenses. FAQ. Learn more about paying taxes on I bonds in the following questions and answers.
How taxes on government bonds work. Government bonds are subject to varying tax treatments at the federal, state and local levels. For example, Treasury bills, notes and bonds are subject to ...
When you buy I bonds, you can choose when you want to pay federal income tax on the interest you earn.You can pay it annually, or you can defer it until your bonds mature. If you've chosen to ...
The principal argument for investors to hold U.S. government bonds is that the bonds are exempt from state and local taxes. The bonds are sold through an auction system by the government. The bonds are buying and selling on the secondary market, the financial market in which financial instruments such as stock, bond, option and futures are traded.
These bonds are government-backed and guaranteed to keep pace with inflation because their return is tied to the Consumer Price Index, and the interest is exempt from state and local taxes.
2. Your I Bond Principal Is Guaranteed. Because I Bonds are backed by the U.S. government they have a low risk of default and offer tax-advantaged interest income.
Bonds issued by the government of Puerto Rico and its subdivisions are exempt from federal, state, and local taxes (so called "triple tax exemption"). However, unlike other triple tax exempt bonds, Puerto Rican bonds uphold such exemption regardless of where the bond holder resides.
For example, if you’re using your federal tax refund, you can buy an additional $5,000 in paper I bonds. The bonds are sold in increments of $25 or more when you buy them electronically.