Want To Use Your Savings Bonds Towards Your Child'S Education And Exclude All The Interest Earned?

Here are some basics on how the Education Savings Bond program works:

You can exclude all or a portion of the interest earned from savings bonds from your federal income tax. Qualified higher education expenses, incurred by the taxpayer, the taxpayers spouse or the taxpayer's dependent at a institution or State tuition plans (see below) have to incur in the same calendar year the bonds are cashed in.

Qualifications and Exclusions:

• Only EE or I Bonds issued January,1990, and later apply. Bonds purchased prior to January 1990 cannot be exchanged towards newer bonds.
• When purchasing bonds to be used for education, you do NOT have to declare that at the time of purchase that you will be using them for education purposes.
• You can choose NOT to use the bonds for education if you so choose at a later date
• You must be at least 24 years old when you purchase the bonds When using bonds for a child's education, register the bonds in your name, NOT the child's name.
• A child CAN NOT be listed as a CO-OWNER on the bond.
• The child can be a BENEFICIARY on the bond and the education exclusion can still apply.
• If you are married, a joint return MUST be filed to qualify for the education exclusion.
• You are required to report both the principal and the interest from the bonds to pay for qualified expenses.

What forms do I need to use bonds for Educational Purposes?
You'll need IRS form 8815 found on our GOVERNMENT SAVINGS BOND FORMS PAGE

Does everyone in every income bracket qualify? *2007*
NO.
Tax Year 2007 Income Limits:
For single taxpayers, the tax exclusion begins to be reduced with a $65,600 modified adjusted gross income and is eliminated for adjusted gross incomes of $80,600 and above.

For married taxpayers filing jointly, the tax exclusion begins to be reduced with a $98,400 modified adjusted gross income and is eliminated for adjusted gross incomes of $128,400 and above. Married couples must file jointly to be eligible for the exclusion.

What Institutions Qualify for the Exclusion?
Post secondary institutions, colleges, universities, and various vocational schools. To qualify, the schools must participate in federally assisted programs (ex. They offer a guaranteed student loan program). Beauty or secretVerdana schools and proprietary institutions usually do not apply.

What are Qualified Expenses?
Tuition and fees, for any course or educational program that involves sports, games or hobbies, lab fees and other required course expenses that relate to an educational degree or certificate-granting program. These expenses must be incurred during the same tax year in which the bonds are cashed in.

Note: Room & Board expenses and books and expendable materials (pens, notepads, etc.) do not qualify.

How does one buy an "Education Savings Bond"?
Since the program utilizes Series EE and I Bonds, there are no differences in purchase procedures except (1) Series EE bonds must have been purchased after December 31, 1989, (2) they must be registered in the taxpayer's name alone, with or without a beneficiary, or in the name of the taxpayer and spouse (not a dependent child) as co-owners, and (3) the taxpayer must be at least 24 years old before the issue date of the bond. Otherwise, the bonds may be purchased like other Series EE or I Bonds.

Is there a limitation on the number or amount of Series EE and/or I Bonds one can buy?
Yes, the standard annual purchase limit of $5,000 in cash ($10,000 for a husband and wife holding bonds as co-owners) for EACH series. $5,000 for paper bonds & $5,000 for electronic bonds of each series ("I" and "EE") or $20,000 total. There's no limit to the amount of bonds that can be accumulated for educational expenses over time-- as long as the amount of bonds purchased and held during a single year doesn’t exceed the limitations discussed above and all other requirements of the program are met.

SavingsBonds.com Inc. TIPS:
When purchasing bonds that you think will be used for educational purposes, purchase them in smaller denominations. That way you won't have to cash in more bonds than are necessary to pay the current college tuition expenses. Remember, any excess monies you receive from cashing in some savings bonds that EXCEED the tuition bills, may create a taxable event when you file your
federal tax return. (Savings Bonds are always exempt from State and Local/City taxes.)