Attention Parents: Can You Benefit From The Savings Bond Education Tax Exclusion Program?
Posted on August 25, 2017
The government offers a beneficial Savings Bond Education Tax Exclusion Program that allows qualified taxpayers to exclude from their gross income all or part of the interest paid when redeeming eligible U.S. Savings Bonds to pay for higher education expenses.
Since bonds did not have to be earmarked for education expenses when initially purchased, many parents may be able to take advantage of the savings bond tax benefits.
1. Series EE and I U.S. Savings Bonds issued after 1989 apply.
2. Purchaser must be at least 24 years old when the bonds were bought.
3. Post-secondary institution must be a college, university, or vocational school that meets the standards for federal assistance.
4. When using bonds for a child’s education, bonds must be issued in either one or both of the parents names. The child can be named as a beneficiary, but not as a co-owner (on paper bonds).*
5. Parents can also use the program for their own college education expenses and bonds must be registered in their name.*
6. Certain income amounts and limitations must be met. If married, you must file jointly. Check IRS Publication 550 for annual income amounts or SavingsBonds.com Education Page.
7. Use IRS form 8815 when filing for the tax exclusion.
Qualified Education Expenses Include:
- Tuition and fees (including required course expenses and lab fees).
- Expenses that benefit the parent, the spouse, or a dependent (if parents claim as an exemption).
- Paid expenses for required courses as part of a degree or certificate-granting program.
- Paid expenses for sports, hobbies or games if part of a degree or certificate program.Note: Books, room and board are NOT qualified expenses. Qualified expenses are reduced for any applied scholarships, fellowships, employer-provided educational assistance (and other forms of tuition reduction).
- Purchase savings bonds in smaller denominations.
- Paper bonds may be worth a lot more than their face value. Always obtain current bond values before redeeming.
- Only redeem enough bonds to pay the current college tuition expenses.
- If any excess monies are received from cashing in savings bonds that EXCEED the qualified expenses, that amount of excludable interest is reduced pro rata.
- Qualified higher education expenses must be incurred during the same tax year the bonds are redeemed.
- Both the principal and interest from the bonds must be used to pay qualified expenses to be able to exclude the interest from one’s gross income.
For more information, go to SavingsBonds.com Education Bonds page. See IRS rules
*For electronic savings bonds, check the Treasury Department for proper registration.
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By Jackie Brahney, Marketing Director, SavingsBonds.com, firstname.lastname@example.org, @savingsbondsgal