Redeem Savings Bonds

Can an investor redeem Series EE US savings bonds and Series I US savings bonds tax free for education purposes?

Yes, investor redeem Series EE US savings bonds and Series I US savings bonds tax free for education purposes if certain qualifications are met.

Series EE US savings bonds issued after 1989 and Series I US savings bonds

For Series EE US savings bonds issued after 1989 and Series I US savings bonds the interest income earned will be federally and state tax exempt, if the savings bond is redeemed to pay qualified higher education expenses for the owner, owner’s spouse or dependents.

To redeem savings bonds for education, what are qualified higher education expenses?

Qualified higher education expenses are tuition and fees (not including room and board) and contributions to 529 plans and Coverdell ESA s.

To redeem savings bonds for education, what affect the amount of savings bonds redemption?

Scholarships, fellowships, employer provided educational assistance and other tuition reduction programs reduce these expenses. The owner of the US savings bond must have been at least 24 years old before the issue date of the US savings bond.

The amount of the interest exclusion is phased out based upon modified adjusted gross income (which is indexed yearly for inflation).

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