TAX NEWS - June 2010

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Unhappy With Tax Hikes? Invest in U.S. Savings Bonds

Say you have some extra money saved up and it is time to decide what to do with it. If you're looking to invest for the long term, you may want to consider using U.S. Savings Bonds. Aside from the fact they get decent market return, they have the benefit of being exempt from some taxes.

Tax Benefits

- No State or Local Tax: Savings bonds are issued through the federal government,  meaning you won't need to worry about paying state and local taxes on the money.

- Deferral of Federal Tax: One of the best reasons to look into U.S Savings Bonds is the fact that they defer Federal Tax until you decide to withdraw your money. With the often-occurring tax increases, this can be beneficial for those who do not want to pay the current tax rates.

Other Benefits

- Safety: Investing in a savings bond is a no-risk investment. There is no way to lose your investment as long as the U.S. government is still up and running.

- Availability: The minimum investment in U.S. Savings Bonds is $25.

- Rates: Although current interest rates are quite low, if you choose to invest in I Savings Bonds, a fixed rate will be combined with an inflation rate, which is calculated every six months to make sure you get a fair return on your investment during the current economic times.

Things to Remember

- Penalties: These bonds are for long-term use only. You should invest in these bonds if you are certain you can keep them growing for five to 10 years. Withdrawing your money within five years means you'll have to forfeit the three most recent months' interest.

- Interest: Pay attention to what time in the month you decide to withdraw your money. If you do it too early in the month you may lose six months' interest. If you do it right before the interest is posted you will not earn the benefits.

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