Saving for College using U.S. Savings Bonds - Part I

3 February 2014
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3 February 2014, Comments 0

Low and middle income parents can help save for college using U.S. Saving Bonds. Taxpayers postpone reporting the interest until the bond is redeemed. Taxpayers may then be able to exclude part or all of the interest from Series EE and Series I Savings Bonds redeemed in the same year the bond proceeds are used to pay for qualified higher education expenses.  There are a few rules to qualify for the tax free interest:

  1. The bond must be purchased by an adult over age 24 and issued in the parent’s name (NOT the child’s).
  2. The redeemed money must be used for tuition and fees (excludes room and board).
  3. If the redeemed money exceeds the qualified expenses, taxes must be paid on that amount.
  4. The tax free interest benefit  is phased out based on modified Adjusted Gross Income between $74,700 and $89,700 for Single Filers, and $112,050 and $142,050 for Married Filing Jointly for 2013.
  5. The annual purchase limit for electronically purchased Series EE and Series I Savings Bonds is $10,000 per individual for each series.
  6. Series I Savings Bonds can be purchased through IRS tax refunds up to $5,000.

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