US Savings Bonds

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Question: questions about Savings Bonds?

My pap collected bonds for me and my brother. I have ee from 92-98 and i from 99-09. They are all $50 bonds. I went on a bond calculator website and the ee bonds were purchased for $25 and the i were purchased for $50. The calculator totaled up to a little over $1100.

Answer: The calculator should be right. The bank shouldn’t charge you any fee to redeem the bonds if you are a customer with them. As to whether you should cash them in you’ll need to consider what interest the bonds are drawing and how badly (if at all) you need the money. They will continue to gain value until they are 30 years old. So your first bonds will keep growing until 2022. If you still have the 1992 bond(s) in 2022 then you should redeem them because they won’t gain any more value. You might call the savings bond redemption unit and ask what the various bonds are earning right now and see how that compares to other things you can do with the bonds if you do cash them in. Also keep in mind that when you cash them in the interest earned is taxable income for that year.

Question: My dependant son will be attending a community colllege?

How do I figure out which tax approach to use? Hope, lifetime learning, tuition deduction, Savings Bonds Interest exclusion? His tuition is about $3,600/year. Are there any calculators to figure this out?

Answer: Some software has calculators to figure out the best education benefit, but if you really want this analysis you need to go to a tax preparer who can do this for you. Professional preparers with proprietary software can run the numbers for you.

In your case, if your income is less than $80K ($160K if married), the best break for your education expenses is the new American Opportunity Credit which has replaced the Hope Credit. The AOC will credit you 100% of the first $2,000 of qualified expenses, plus 25% of the next $2000 of qualified expenses, for a maximum credit of $2,500. Even if you owe no tax, 40% of this credit is refundable, meaning you may receive a payment of up to $1,000 if you owe no tax but take the maximum credit.

Any expenses you pay for with EE Savings Bonds for which you exclude the interest will not be counted toward the AOC.