If the following conditions are met, the interest collected on Series EE and Series I bonds can be utilized tax-free for education expenses:
- The funds are to be used for approved educational expenses for either the parent or the dependent child. Tuition and expenses for courses that count toward a degree or certificate program are included in this category. Books, as well as accommodation and board, are not considered eligible costs.
- Financial aid, scholarships, 529 funds, School Savings Accounts (ESAs), or other tax advantages have not already covered the eligible education expenses.
Is it possible to use tax-free savings bonds for education?
Advantages. The interest on these bonds is tax-free if spent for eligible higher education expenses since they are backed by the full faith and credit of the United States government. In addition, interest on Series EE and I savings bonds is normally tax-free in most states.
How do you cash in your college savings bonds?
Savings bonds must first be sold or redeemed before being rolled into a 529 plan. The money will not be taxed as long as it is deposited into a 529 plan within 60 days. 3 When submitting your taxes, make sure to include Form 8815.
What can you do with a savings bond?
Savings bonds are a type of government debt that is offered to citizens of the United States to help support federal spending. Savings bonds are purchased at a discount and mature at their full face value, but they do not pay regular interest.
What is the purpose of college savings bonds?
Qualified taxpayers can deduct all or part of the interest earned on eligible savings bonds from their annual gross income under the education savings bond program. When the bonds’ owners utilize both the principle and interest to pay for higher education at approved institutions, either for themselves, their spouses, or their dependents, the bonds become tax-free.
Is it necessary to report savings bonds on the fafsa?
The federal government, as well as schools and institutions, use the free application for federal student aid, or FAFSA, to calculate how much financial help a student is eligible for. When completing the FAFSA, you must enter the current value of any savings bonds you own as an investment asset, not the face amount. For FAFSA purposes, a bond registered in the child’s name counts as an asset possessed by the child. It is reported as a parental asset if it is owned by the parent, which has a reduced influence on the student’s possible aid.
How do I redeem EE bonds for educational purposes?
Bonds between electronic devices Log in to TreasuryDirect and follow the on-screen instructions. Within two business days after the redemption date, the cash amount will be credited to your bank or savings account.
How can I save money on savings bonds without paying taxes?
Cashing your EE or I bonds before maturity and using the money to pay for education is one strategy to avoid paying taxes on the bond interest. The interest will not be taxable if you follow these guidelines:
- The bonds must be redeemed to pay for tuition and fees for you, your spouse, or a dependent, such as a kid listed on your tax return, at an undergraduate, graduate, or vocational school. The bonds can also be used to purchase a computer for yourself, a spouse, or a dependent. Room and board costs aren’t eligible, and grandparents can’t use this tax advantage to aid someone who isn’t classified as a dependent, such as a granddaughter.
- The bond profits must be used to pay for educational expenses in the year when the bonds are redeemed.
- High-earners are not eligible. For joint filers with modified adjusted gross incomes of more than $124,800 (more than $83,200 for other taxpayers), the interest exclusion begins to phase out and ceases when modified AGI reaches $154,800 ($98,200 for other filers).
The amount of interest you can omit is lowered proportionally if the profits from all EE and I bonds cashed in during the year exceed the qualified education expenditures paid that year.
After 30 years, how much is a $50 EE savings bond worth?
Savings bonds are regarded as one of the most secure investments available. The underlying principle is that the value of a savings bond grows over time, but it’s easy to lose track of how much it’s worth over time.
The TreasuryDirect savings bond calculator, fortunately, makes determining the value of a purchased savings bond a breeze. You’ll need the bond series, face value, serial number, and issuance date to figure out how much your savings bond is worth.
If you bought a $50 Series EE bond in May 2000, for example, you would have paid $25. At maturity, the government committed to repay the face amount plus interest, bringing the total value to $53.08 by May 2020. A $50 bond purchased for $25 30 years ago is now worth $103.68.