Normally, the interest you earn on your savings bonds becomes part of your gross income for tax purposes. Under certain conditions, though, you can avoid taxes on the interest by using it to pay for higher education.
Which savings bonds qualify?
Series EE or I savings bonds issued after 1989.
They must be registered with you as the owner. If you are married, they may be registered with you and your spouse as owners.
Important: Note the age restriction in the next section. The owner of the bond must be 24 years or older when the bond is issued. Therefore, a bond registered with a child as owner will not qualify even years later when the child is ready for college. If you want to buy savings bonds to later get this tax exclusion for a child's higher education, you must register the bonds with yourself, or yourself and your spouse, as owners.
What other restrictions apply?
You can take the tax exclusion if you meet all of these conditions:
- You were 24 years old or older before the bonds were issued.
- Your modified adjusted gross income is less than the cut-off amount that the IRS sets for the year in which you want to take the exclusion. The cut-off amount may change each year. You can find the current cut-off amount on IRS Form 8815.
- You cash the qualifying savings bonds in the same tax year for which you are claiming the exclusion.
- You paid qualified higher education expenses to an eligible institution that same tax year. (The instructions that come with IRS Form 8815 explain both "qualified expenses" and "eligible institution." They also tell you what records you must keep.)
- The expenses were for yourself, your spouse, or someone you list as a dependent on your federal income tax return.
- You file your IRS tax return with any status EXCEPT married filing separately.
Where can I find more information?
IRS Form 8815 gives details and instructions.
How do I get the tax exclusion?
If you meet all the conditions, fill out IRS Form 8815 and submit it with your tax return.
FAQs
The interest earned on series EE and Series I bonds can be used tax-free for college if the following conditions are met: The funds are used for qualified educational expenses for parent or dependent child. These include tuition and fees for courses that count toward a degree or certificate program.
Which taxpayer can claim the exclusion for interest on US savings bonds used for higher education purposes? ›
To qualify for this exclusion, the taxpayer, the taxpayer's spouse, or the taxpayer's dependent at certain post-secondary educational institutions must incur tuition and other educational expenses. Persons with incomes above certain thresholds may not be eligible to participate.
How do I cash in my education savings bonds? ›
Electronic EE or I savings bonds
- Go to your TreasuryDirect account.
- Go to ManageDirect.
- Use the link for cashing securities.
Which savings bonds qualify? Series EE or I savings bonds issued after 1989. They must be registered with you as the owner. If you are married, they may be registered with you and your spouse as owners.
What qualifies as higher education expenses? ›
They include amounts paid for the following items:
- Tuition and fees.
- Room and board.
- Books, supplies, and equipment.
- Other necessary expenses (such as transportation)
Using the money for higher education may keep you from paying federal income tax on your savings bond interest.
How do you avoid tax on treasury bonds? ›
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
How much is a $100 savings bond worth after 30 years? ›
How to get the most value from your savings bonds
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
The savings bonds must be redeemed to pay for qualified higher education expenses at an eligible institution or rolled over into a Qualified Tuition Plan (QTP) or a Coverdell education savings account. Qualified Tuition Plans include 529 college savings plans and prepaid tuition plans.
How long does it take to get money from TreasuryDirect? ›
You just bought a security from the U.S. Treasury. Securities are generally issued to your account within two business days of the purchase date for savings bonds or within one week of the auction date for Bills, Notes, Bonds, FRNs, and TIPS.
If you invest in TreasuryDirect, your 1099 will be available electronically and you can print the form from your account. 1099 forms are available by January 31 of each tax year.
How do I redeem I bonds from TreasuryDirect? ›
Log into your primary TreasuryDirect® account. Click on the ManageDirect tab at the top of the page. Click "Redeem securities" under the Manage My Securities heading. On the Redemption page, choose the radio button beside Zero-Percent C of I and click "Submit".
How to use bonds for education? ›
Using Series I bonds for college savings
The federal government allows qualified holders of Series I bonds – and Series EE bonds, too – to exclude from their income any interest paid when the bonds are cashed as long as the bond owner pays qualified education expenses at an eligible educational institution.
What is the exclusion for educational savings bonds? ›
An education savings bond program lets qualified taxpayers exempt all or a portion of interest earned upon redemption of eligible savings bonds from their annual gross income.
Do you pay taxes on savings bonds when cashed? ›
In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.
Are I bonds a good way to save for college? ›
I bonds are certainly a reasonable alternative for college savings, but the various restrictions on their purchase and use may make 529 college savings plans a better option for many families.
Do I bonds count against fafsa? ›
Investments include real estate, but not the home you live in; trust funds, Uniform Gift to Minors Act (UGMA) account or Uniform Transfer to Minors Act (UTMA) account, money market funds, mutual funds, certificates of deposit, stocks, stock options, bonds, other securities, installment and land sale contracts, ...
Can I buy $10,000 worth of I bonds every year? ›
Can I buy I bonds every calendar year? Yes, you can purchase up to $10,000 in electronic I bonds each calendar year. You can also buy an additional $5,000 in paper I bonds using your federal tax return.
What is a university bond? ›
Bond financing may permit a school to build its projects sooner, expand the scope of its projects, or direct its fundraising to other purposes. With facilities financed by low-interest, long-term bonds, fundraising can be directed into endowment and other projects, as well as into debt reduction.
