Get the most out of your tax refund

Get the most out of your tax refund

Military Saves Week runs from Feb. 27 to March 3. The Financial Readiness Program is offering financial counseling, classes and other events to help service members and their families manage their money. (U.S. Army photo by Kristen Wong)

By Rindi White

It’s the height of income tax season, and many people already have a short list of items they plan to buy with their tax return. Instead of splurging, why not use this as an opportunity to pad your savings or build an emergency fund? suggests splitting a portion of your tax return into your savings account or even using it to buy U.S.-backed savings bonds.

Savings bonds — what are they?

Savings bonds were created in 1935 by legislation signed by President Franklin D. Roosevelt. Americans were encouraged to do their patriotic duty by buying bonds, which helped finance the government. The bonds are safe investments: They will never be worth less than what you initially pay, and they currently pay out between 0.10 percent interest and 2.76 percent interest (check current rates here). Rates are updated twice yearly.

Buying a saving bond offers a few tax breaks. You don’t have to pay state or local income tax on the interest the bonds earn and, for federal tax purposes, you don’t have to pay taxes on the interest until the bonds are redeemed. If the bonds are used to pay for college, the interest may be tax-exempt.

There are two main types of bonds: I Series and EE Series. The I Series was introduced in 1998 to encourage Americans to save, according to financial publisher The I Series generally offers an attractive interest rate and is adjusted for inflation based on the Consumer Price Index. The interest on an I Series bond compounds, tax-deferred, until the bond is redeemed. An EE Series bond is a fixed-rate bond that generally pays a lower interest rate than I Series bonds.

Bonds can be purchased for any amount over $25, up to $10,000. They can be redeemed after 1 year, but if you redeem the bond in the first five years after its purchase, you forfeit three months of interest earnings.

Paper I bonds can be bought with a portion of your IRS tax refund by filling out Form 8888 (find out more about that here). Electronic bonds can also be purchased online anytime by going to TreasuryDirect at

The website SaveYourRefund offers anyone who uses Form 8888 to save a portion of their IRS  (as little as $50) to enter to win one of 100 $100 prizes by entering your savings information. SaveYourRefund is affiliated with AmericaSaves and its military component, MilitarySaves. The organization also offers entrants a second contest for $25,000 by submitting a photo of your savings goal or motivation.

SaveYourRefund says the annual tax return often is the largest sum of money American households receive in a year. More than 113 million tax filers received an average of $2,867 per filer in 2011 with more than $324 billion total refunded that year. Find out more about SaveYourRefund and the contest at

MilitarySaves is also participating in the annual #ImSavingFor video and photo contest, with a chance for entrants to win $1,000. To enter that contest, savers need only create a video of their savings story or submit a photo of themselves and their savings goal. Find out more about that contest at

The contest is open until April 7, 2017.

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