Investing and Taxes

Does the IRS give special tax exemptions to people who use the savings bonds to fund educational endeavors?

Yes, the savings bond education tax exclusion permits qualified taxpayers to exclude from their gross income all or part of the interest received upon the redemption of eligible Series EE and Series I Bonds issued after 1989 when the bond owner pays qualified higher education expenses at an eligible institution. But there are additional requirements that must be met. Qualified higher education expenses must be incurred during the same tax year in which the bonds are redeemed. You must be at least 24 years old on the first day of the month in which you bought the bond(s). When using bonds for your child’s education, the bonds must be registered in your and/or your spouse’s name(s). Your child can be listed as a beneficiary on the bond, but not as a co-owner. When using bonds for your own education, the bonds must be registered in your name for use at a college, university, or vocational school that meets IRS standards. If you are married, you must file a joint return to qualify for the exclusion. You must also meet certain income requirements. Your post-secondary institution must qualify for the program by offering federal assistance (such as guaranteed student loan programs). Please consult your tax adviser for more information.


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