Would you consider I-Bonds as tax deferred?

gogottliebs88

If the interest isn't considered income until you cash out the bonds would you consider I-bonds as a tax deferred account?

Tom Young

If you've elected to use the cash method and only pay tax on your I bonds when you redeem them, then putting the I-Bonds in a tax-deferred Account does make some sense.  In this situation the I-Bonds function pretty much like a traditional IRA in that income received via the amortization of the "0-coupon" aspect of the bonds isn't taxable, but the redemption (in effect taking money out of the "IRA") is taxable.

In a true accounting sense the amortization of the discount IS income so alternatively you could put the I-Bond in a taxable Investing Account, but then not use that Account when preparing Tax Reports, if you use that Quicken feature.

gogottliebs88

Thanks Tom. The reason was explained by your second paragraph. Yes I was trying to streamline the process for tax reporting and forecasting without customizing the report to eliminate the I-Bond account. I guess its my choice between ease of use or following true accounting principles. Nice to know my thinking wasn't conceptually off-base.