You can still get your tax refund sent to your checking account, say, and then use the money to buy digital I bonds via TreasuryDirect. What’s going away is the ability to fill out a special form with your tax return and have the paper bonds bought with your refund.
The change was quietly announced with a website update last year, under the Biden administration.
The tax-time savings bond program was begun in 2010 to give tax filers, especially those with low and moderate incomes, a way to buy I bonds with their refunds. But the program “was costly and not frequently used,” the TreasuryDirect site says. On average, 35,000 tax filers bought paper I bonds each year, representing .03 percent of tax filers and less than 10 percent of I bond purchasers. Mailing paper bonds risked fraud, theft, loss and delays, the site says, adding that buying savings bonds online is “simple, safe and affordable.”
David Enna, founder of Tipswatch.com, a website that tracks securities that protect against inflation, said the government hadn’t widely publicized its new I bond purchase policy. Some tax filers are likely to be disappointed, he said, because a popular strategy was to overpay taxes during a tax year to generate a tax refund to buy the bonds the next spring.
The loss of the option to buy an extra $5,000 in I bonds will probably be unpopular among buyers, he said. The $10,000 annual cap, he said, is “too small,” because it takes years to buy enough bonds to generate significant interest.
I bonds, first issued in 1998, grabbed savers’ attention during the pandemic-induced inflation surge. In 2022, the interest rate on I bonds rose to well over 9 percent, far outpacing rates on other safe options for cash.