Archive for January, 2010

Advantages and Disadvantages of U.S. Savings Bonds

Posted By Marty Higgins | January 3rd, 2010

Series EE bonds (may also be called Patriot bonds) issued January 1990 and later

Series I bonds

Advantages
  • Interest earned is generally exempt from state income tax
  • Interest earned may be exempt from federal income tax if bond proceeds are used to pay the beneficiary’s qualified education expenses, provided certain other conditions are met*
  • Bonds are backed by the federal government, so they offer a virtually guaranteed rate of return
  • You retain control of the bonds as long as they are owned in your name
  • Series EE bonds are purchased at half their face value, so you can begin investing with smaller amounts
  • Bonds earn interest for up to 30 years
  • Bonds are treated as a parental asset for federal financial aid purposes and assessed at a rate of 5.6 percent

Disadvantages
  • Bond proceeds that are not used for the beneficiary’s qualified higher education expenses will be taxed to the owner
  • Qualified education expenses for purposes of U.S. savings bonds generally include tuition and fees only, not room and board
  • The maximum annual purchase allowed is $15,000 per individual for EE bonds ($30,000 face value) and $30,000 for I bonds (EE bonds may be purchased at half their face value; I bonds are purchased at full face value)
  • Your income must be below a certain level at the time you redeem (cash in) the bonds for you to be eligible to exclude the interest earned from federal income tax (yet you must add the bond proceeds into your total income for the year when determining whether you meet this income threshold)*

*For the interest to be excluded from federal income tax, the following conditions must be met: (1) the owner must be at least 24 years old when the bonds are purchased (2) the beneficiary must be the owner, the owner’s spouse, or the owner’s dependent and (3) in 2010, the owner’s modified adjusted gross income (MAGI) at the time the bonds are redeemed (cashed in) must be less than $70,100 for a full exemption for single filers (a partial exemption is allowed for MAGI between $70,100 and $85,100) and less than $105,100 for joint filers (a partial exemption is allowed for MAGI between $105,100 and $135,100).

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Securities and advisory services offered through Mutual of Omaha Investor Services, Mutual of Omaha Plaza, Omaha, NE 68175-1020. The information provided is general in nature. It has been obtained from sources believed to be reliable, but no warranty is made as to its accuracy, timeliness or completeness. The information is not intended, and should not be construed as legal, tax or investment advice, or a legal opinion. Consult with your legal, tax or investment professional before taking any action based on this information. This information is not an offer to buy or sell any security. Past performance is not a guarantee or prediction of future returns. Potential investors should review all prospectuses before investing. There is no contractual relationship between Family Wealth Management Advisory,LLC and Mutual of Omaha Investor Services

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Martin Higgins is a registered representative and investment adviser representative of Mutual of Omaha Investor Services, a securities broker/dealer and registered investment adviser. Home Office: Mutual of Omaha Plaza, Omaha, NE 68175-1020. Member FINRA / SIPC. There is no contractual relationship between Family Wealth Management and Mutual of Omaha Investor Services, Inc. Martin Higgins can only do business in states in which he is registered. The information presented on this web site is intended for educational purposes only, and is not intended to replace the advice of an attorney or qualified tax professional.