The Treasury Department’s Series EE and Series I U.S. Savings Bonds offer a low-risk, modest-return option for college savings. The interest collected on the bonds is normally tax-free as long as it is utilized to pay for eligible educational expenditures. When bought early in a student’s life, they provide a safe, guaranteed return once college arrives.
How do I cash in my EE college savings bonds?
- Whether you have a local bank account and it accepts savings bonds, inquire if it will accept yours. The answer may be contingent on the length of time you’ve had an account there. If the bank will cash your check, find out if there is a monetary restriction on redemptions and what kind of identification and other documentation you’ll need.
- Send these, along with FS Form 1522, to Treasury Retail Securities Services (download or order). The bonds are not required to be signed. You’ll need to verify your identity. The instructions are on FS Form 1522, in the “Certification” section. Our address is also included in the form.
How do I pay for college with my bond?
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.
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.
Is it possible to pay off student loans with savings bonds?
Unless you redeem a bond within the first five years after its issuance, there is no interest penalty. As a result of the early redemption penalty, you will forfeit the last three months’ interest earnings. Although the government makes an exception for disaster victims, savings bonds cannot be redeemed in the first year of issuance.
The education tax deduction involves income limits and restrictions for how savings bonds must be registered, in addition to naming what counts as a higher-education expense. On TreasuryDirect’s “Education Planning” page, you may learn more about it.
Is it possible to pay for college with EE bonds?
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.
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.
What impact do savings bonds have 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 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 filers), the interest exclusion begins to phase out and ends 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.
What is the process for converting savings bonds to 529 plans?
Savings bonds cannot be transferred directly into a 529 plan account. The bonds must instead be redeemed and the money transferred into a 529 plan account. Within 60 days of cashing in the bonds and within the same tax year, the proceeds must be put into a 529 college savings plan.
Can grandparents use savings bonds to pay for college?
It’s not easy, but when redeeming savings bonds to pay for a grandchild’s college expenses, grandparents can avoid a tax payment. Answer: You can use savings bonds to help pay for college, and the interest you receive on them may not be subject to federal income tax in some situations.