azucena
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Post by azucena on Nov 8, 2024 11:32:24 GMT -5
My brain is mush.
If I cash out Ibonds I'm taxed at what federal tax rate?
If I wait and cash them in two years to pay DD16s college tuition then I won't owe any taxes?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Nov 8, 2024 11:41:12 GMT -5
My brain is mush. If I cash out Ibonds I'm taxed at what federal tax rate? If I wait and cash them in two years to pay DD16s college tuition then I won't owe any taxes? it is interest at whatever your fed income tax rate is, no state income tax though. I'm not aware of any special provisions for education on ibond interest. |
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Post by minnesotapaintlady on Nov 8, 2024 11:48:25 GMT -5
My brain is mush. If I cash out Ibonds I'm taxed at what federal tax rate? If I wait and cash them in two years to pay DD16s college tuition then I won't owe any taxes? You are taxed at your marginal rate (whatever that is) on the interest earned. It's just regular interest like a bank account.
Interest on I bonds in your name used for education for yourself, your spouse or your dependents is tax-free. If they are in your kid's name (or they are joint owners) it will not be because you have to be at least 24 years old when the bonds were issued for them to be tax-free for college.
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azucena
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Post by azucena on Nov 8, 2024 13:02:39 GMT -5
Thanks to both of you for helping me do my homework.
Leaning towards cashing them out then and taking the tax hit and then moving them into the CDs I was seeing around 4%.
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seriousthistime
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Post by seriousthistime on Nov 8, 2024 13:21:16 GMT -5
Capital One has an 11-month CD at 4.5% right now.
I decided to take the hit this year because I'm solidly in the middle of my tax bracket so I have room to report income without it pushing me into a higher bracket. Ditto with the IRMAA threshold for Medicare.
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Artemis Windsong
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Post by Artemis Windsong on Nov 8, 2024 18:53:43 GMT -5
I'm on the fence. I told H. what the interest rate would be and received no response. I am also trying to decide to cash in. I do have one with the fixed rate. Can I trade in the one that will be 1.9% into a fixed rate bond. I'd lose the 3 months interest held back on the initial purchases. We need to look at taxes on the interest when cashed in. One goof 2 years ago when cashing in EE bonds was the tax. That was brutal.
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azucena
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Post by azucena on Nov 8, 2024 20:11:59 GMT -5
Capital One has an 11-month CD at 4.5% right now. I decided to take the hit this year because I'm solidly in the middle of my tax bracket so I have room to report income without it pushing me into a higher bracket. Ditto with the IRMAA threshold for Medicare. I already have a cd at capital one so helps to have it in one spot. Did the math and if I move all our Ibonds from the 2.96% to the 4.5%, will earn almost $1000 more over the 11 months. Seems worth it and DH gave go ahead. I always try to include him in investment decision. |
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azucena
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Post by azucena on Nov 8, 2024 20:13:14 GMT -5
It's exciting to be earning real interest on 4-6% low risk investments for my massive emergency and dd16 college funds. Fun to see the interest add to what I've carefully saved the last few years.
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seriousthistime
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Post by seriousthistime on Nov 9, 2024 8:34:51 GMT -5
It's exciting to be earning real interest on 4-6% low risk investments for my massive emergency and dd16 college funds. Fun to see the interest add to what I've carefully saved the last few years. I believe Capital One Performance Savings accounts are paying 4.00% right now. If you think you might need access to the money from time to time, it's a great interest rate though it does fluctuate. |
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azucena
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Post by azucena on Nov 9, 2024 9:02:37 GMT -5
It's exciting to be earning real interest on 4-6% low risk investments for my massive emergency and dd16 college funds. Fun to see the interest add to what I've carefully saved the last few years. I believe Capital One Performance Savings accounts are paying 4.00% right now. If you think you might need access to the money from time to time, it's a great interest rate though it does fluctuate. Good to know but this what we have earmarked for DD16 college fund so needed first portion fall 2026. Can't believe it's that close! I also need to look into my usbank savings where I have about $30k true emergency fund. It's back to earning <1% again. They keep playing with "new" savings accounts earning higher interest but i have to get there in person to request the change and then see if it topples any of the free checking stuff. Stupid and not the right way to treat customers but hey saves them money. |
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aricia
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Post by aricia on Nov 13, 2024 13:50:10 GMT -5
My brain is mush. If I cash out Ibonds I'm taxed at what federal tax rate? If I wait and cash them in two years to pay DD16s college tuition then I won't owe any taxes? I think you already made your decision, and maybe I missed this being mentioned, but for future reference, there are income limits to being able to use savings bonds tax free for education. For married couples filing jointly, the phase out range starts at $145,200 MAGI and ends at $175,200, for 2024. If I remember correctly, you are over the limit. |
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Post by minnesotapaintlady on Nov 13, 2024 14:06:07 GMT -5
My brain is mush. If I cash out Ibonds I'm taxed at what federal tax rate? If I wait and cash them in two years to pay DD16s college tuition then I won't owe any taxes? I think you already made your decision, and maybe I missed this being mentioned, but for future reference, there are income limits to being able to use savings bonds tax free for education. For married couples filing jointly, the phase out range starts at $145,200 MAGI and ends at $175,200, for 2024. If I remember correctly, you are over the limit. Gah! I always forget about income limits getting in the way for anything because they never apply to me. But, you're right, it's unlikely azucena qualifies for tax-free interest. |
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saveinla
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Post by saveinla on Nov 13, 2024 14:43:48 GMT -5
I believe Capital One Performance Savings accounts are paying 4.00% right now. If you think you might need access to the money from time to time, it's a great interest rate though it does fluctuate. Good to know but this what we have earmarked for DD16 college fund so needed first portion fall 2026. Can't believe it's that close! I also need to look into my usbank savings where I have about $30k true emergency fund. It's back to earning <1% again. They keep playing with "new" savings accounts earning higher interest but i have to get there in person to request the change and then see if it topples any of the free checking stuff. Stupid and not the right way to treat customers but hey saves them money. Call them within the week your cd matures to get better rates. I know you are swamped, but thats a good chunk of change. |
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