Answering almost all the questions about savings bonds
By HELEN HUNTLEY, Times Staff Writer
© St. Petersburg Times, published December 8, 2002
Q. Could you please answer these questions for me regarding EE savings bonds: Is there a maximum amount that can be invested in a year? What is the interest rate and when does it change? When do bonds mature? How can I get information by mail since I do not have a computer?
A. You can buy up to $15,000 worth of EE bonds ($30,000 face value) each year. Bonds you buy as a gift for someone else do not count against this limit. The purchase limit on I bonds is $30,000 a year.
The current interest rates are 3.25 percent for EE bonds and 4.08 percent for I bonds. The rates change every six months, on May 1 and Nov. 1. Because the rates are variable, no one can tell you when your EE bond will be worth its face value. However, the Treasury guarantees that this will take no more than 17 years. Both EE and I bonds reach final maturity and stop paying interest after 30 years. EE bonds can be exchanged for HH bonds, which could add another 20 years of tax deferral.
To get written information about savings bonds, call the local savings bond office at (813) 348-1708 and request brochure SB-2349. Additional details can be found online at www.savingsbonds.gov. Bonds can be purchased online or through banks, payroll deduction and automatic transfers from a bank account.
Q. I know that the maximum capital loss that you can deduct on your federal tax return is $3,000 a year. I have a loss of more than $5,000, but I would like to take only part of the $3,000 maximum this year. Can a taxpayer claim in any one year only the capital loss that reduces his tax liability to a desired level, or must a person claim the full $3,000 when possible?
A. If you've got at least $3,000 of income that could be offset by the capital loss, you've got to claim the full $3,000.
"The law says use it or lose it," said St. Petersburg accountant Wayne "Skipp" Fraser. He cites an IRS ruling against a taxpayer who did not claim any of a loss he was carrying forward because it would have generated only a small tax benefit. He wanted to carry the full loss forward to the next year. The IRS did not allow it.
Of course, you can carry forward losses that exceed your income or that exceed the $3,000 maximum that can be deducted against income each year.
Q. I recall reading that mortgage holders could ask their mortgage company to reduce the interest rate. I cannot remember the specific terminology for this request. What is it?
A. Sadly, it is unlikely that your lender will reduce the interest rate on your current mortgage no matter how nicely you ask. However, your lender might very well be willing to refinance your mortgage at a lower rate. There will be closing costs involved, but they may be less than typical because your lender already has a lot of information about you and your house in its files.
I suspect that the article you recall referred to "streamline" refinancing for FHA and VA mortgages. No matter what type of mortgage you have, if you are thinking of refinancing, you should check with your current lender. Then you can compare that offer with other possibilities.
Of course, any change in your credit rating or your income since you took out your original mortgage will affect your ability to refinance and the interest rate you are offered.
Q. There is a radio commercial put on by a local financial planner, claiming a new IRS code that permits you to withdraw from an IRA annuity tax free. They point out that this is a new code that most people aren't aware of. Do you know anything about this?
A. No. And neither does IRA expert Ed Slott, with whom I checked.
"It sounds like they are using this to get you to go to a seminar," he said.
The only time withdrawals from an IRA or an annuity are tax free is when they represent return of your after-tax contributions.
The National Consumers League (www.nclnet.org) offers online brochures on a variety of topics including generic drugs, online shopping and, most recently, choosing a cell phone plan.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.