I Bond Gift Tax Rules You Need to Know
Understand the tax implications when gifting I bonds. Learn how the gift's valuation, timing, and ownership structure determine your tax responsibilities.
A Series I savings bond is a security issued by the U.S. government that earns interest through a combination of a fixed rate and a variable inflation rate. This structure is designed to protect the value of your money from inflation. The federal gift tax is a tax applied to the transfer of property from one individual to another without receiving something of equal value in return. The act of giving an I bond can trigger gift tax considerations, and the rules governing these transactions depend on whether the bond is newly purchased for someone or an existing bond is transferred to a new owner.
Gifting Newly Purchased I Bonds
When you purchase a new I bond directly for another person, the transaction is considered a gift. The value of this gift is the purchase price of the bond. This amount is measured against the annual gift tax exclusion, an amount set by the IRS that an individual can give to any number of people per year without tax consequences. For 2025, this amount is $19,000 per recipient.
If the total value of gifts, including the I bond, to one person in a year remains at or below this exclusion limit, you do not owe any gift tax. You are not required to file a gift tax return to report it. For instance, if you buy a $10,000 electronic I bond for a grandchild and have made no other gifts to that grandchild during the year, the transaction falls within the annual exclusion, and no special tax filing is needed.
Married couples have the option of “gift splitting,” which allows them to combine their individual annual exclusions for a single recipient. This allows a couple to jointly give up to double the individual exclusion amount to any person. To utilize gift splitting for an amount exceeding the individual annual limit, a gift tax return must be filed, even if no tax is ultimately due.
Transferring Existing I Bonds as Gifts
Gifting an I bond that you already own involves a different valuation method. When you transfer ownership of an existing bond, the value of the gift is its full redemption value at that moment. This value includes the original amount paid for the bond plus all the interest that has accrued up to the date of the transfer. This total redemption value is the figure that must be compared against the annual gift tax exclusion. You can determine the current value of your electronic bonds by logging into your TreasuryDirect account.
Gifting an I bond you already own can also trigger an income tax event for the giver. When the bond is reissued in the recipient’s name, the original owner is required to recognize all the deferred, untaxed interest income in the year the gift is made. This creates an income tax liability on the accrued interest, separate from any gift tax considerations.
How to Report an I Bond Gift
If the value of an I bond gift exceeds the annual exclusion amount, you must report it to the IRS. You will need your name and address, the recipient’s (donee’s) name and address, a clear description of the gift, and its precise value as of the date the gift was made. The gift must be reported on IRS Form 709, the U.S. Gift (and Generation-Skipping Transfer) Tax Return, which is due by April 15 of the year following the year in which the gift was made.
Filing Form 709 does not automatically mean you will owe tax. The amount of the gift that exceeds the annual exclusion is applied against your lifetime gift and estate tax exemption. This is a large credit allowing individuals to transfer significant assets over their lifetime or at death tax-free. Only when this lifetime exemption is fully exhausted would an out-of-pocket gift tax payment be required.
Co-Ownership and Beneficiary Rules
When you purchase an I bond and list another person as a co-owner, a taxable gift has not occurred at the time of purchase. The gift is only considered made if the co-owner who did not provide the funds to buy the bond redeems it and keeps the proceeds. The value of the gift at that point would be the redemption amount.
Naming a “Payable on Death” (POD) beneficiary on an I bond is not a gift. This designation is an estate planning tool that transfers the bond’s value upon the original owner’s death. Upon the owner’s death, the value of the I bond becomes part of their taxable estate and is subject to estate tax rules, not gift tax rules.