How to Buy a Bond as a Gift

Gifting bonds offers a financial asset that can grow in value over time. Understanding the process for selecting, purchasing, and managing these gifts helps ensure a smooth experience for both the giver and the recipient. This guide aims to navigate the practical steps involved in buying a bond as a gift.

Choosing the Right Bond for Gifting

When considering a bond as a gift, U.S. Savings Bonds, specifically Series EE and Series I bonds, are suitable options. These bonds are backed by the full faith and credit of the U.S. government, offering a secure and low-risk investment. Their fixed value and predictable growth make them straightforward for gifting.

Purchasing these savings bonds for gifting is primarily done through TreasuryDirect, an online platform. While other Treasury securities like Bills, Notes, and Bonds are also available, their market-driven prices and potential need for brokerage accounts make them generally more complex for direct gifting to individuals. Series EE and Series I bonds provide a simpler, more accessible entry point for gift-givers.

Before making a purchase, the giver must gather specific information about the recipient to ensure proper registration. This includes the recipient’s full legal name, their Social Security Number (SSN) or Taxpayer Identification Number (TIN), and their date of birth. If the recipient already possesses a TreasuryDirect account, obtaining their account number can streamline the gifting process.

Steps to Purchase and Gift Bonds

Purchasing and gifting U.S. Savings Bonds primarily occurs through the TreasuryDirect website. The giver must first establish their own free account on TreasuryDirect. This account serves as the central hub for managing their own bond holdings and facilitating gift purchases. The system requires an active bank account for transactions and a valid email address for communications.

Once logged into TreasuryDirect, the giver can navigate to the “BuyDirect” section to initiate a gift purchase. They will select the specific bond series they wish to gift. The next step involves inputting the recipient’s information, including their full name, Social Security Number or Taxpayer Identification Number, and date of birth. This ensures the bond is properly registered in the recipient’s name.

The system will prompt the giver to specify the purchase amount, which can be as low as $25 for electronic bonds. After confirming all details, the giver completes the transaction by authorizing a direct debit from their linked bank account. The bond is then electronically issued and held in a “Gift Box” within the giver’s TreasuryDirect account until the recipient claims it or the giver initiates a transfer. If the recipient already has a TreasuryDirect account, the bond can be directly delivered to their account. If they do not, the bond will remain in the giver’s Gift Box until the recipient opens an account and accepts the gift.

Tax Considerations for Gifted Bonds

Understanding the tax implications is important for both the giver and the recipient. For the giver, the act of gifting a bond falls under general gift tax rules. In 2025, the annual gift tax exclusion allows an individual to give up to $19,000 to any one person without having to file a gift tax return or incur gift tax liability. Most gifted bonds will not trigger any gift tax for the giver.

For the recipient, the interest earned on U.S. Treasury bonds is subject to federal income tax. This interest is generally exempt from state and local income taxes. The timing of when this interest becomes taxable for the recipient depends on the bond type and how the recipient chooses to report it.

For Series EE and Series I savings bonds, recipients can elect to defer reporting the interest income until the bond matures or is redeemed, whichever comes first. Alternatively, they can choose to report the interest annually as it accrues. This deferral option allows the interest to grow tax-free until a future date. The recipient will receive a Form 1099-INT from TreasuryDirect when they redeem the bond, detailing the accumulated interest to be reported on their federal income tax return.

Redeeming Gifted Bonds

When it comes time for the recipient to access the value of their gifted bond, the process primarily occurs through the TreasuryDirect online platform. If the recipient does not already have a TreasuryDirect account, they will need to establish one to accept and manage the gifted bond. This involves an online registration process, providing their personal information and linking a bank account for direct deposit of redemption proceeds.

Once the recipient’s account is established and the gift bond is transferred to their portfolio, they can initiate a redemption request. U.S. Savings Bonds, including Series EE and Series I bonds, have a minimum holding period of 12 months before they can be redeemed. If redeemed within five years of the issue date, a penalty of three months’ interest is forfeited. The redemption process involves selecting the specific bond from their account and specifying the amount they wish to redeem.

The funds are then electronically deposited into the recipient’s linked bank account, usually within one to two business days. For older, physical paper savings bonds, which are now rarely issued, redemption involves presenting the bond at a financial institution or mailing it to the Treasury Retail Securities Services. Most gifted bonds today are electronic, making the TreasuryDirect online redemption the standard procedure.