US Savings Bonds

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How to use U. S. Savings Bonds to Fund a 529 plan

For qualified U. S. Savings Bonds issued after 1989, interest accrued may be federal income tax exempt, if the U. S. savings bond is redeemed to pay qualified higher education expenses.

For purposes of this tax exclusion, qualified higher education expenses include tuition, Contributions to 529 Plans and expenses for certain fees.

In order for you to benefit from the U. S. Savings Bonds tax exemption, make sure you complete each of these steps:

Note:

Redemption and the deposit of the savings bond redemption proceeds into a Higher Education 529 Fund must occur within the same calendar year.

One advantage of owning US Savings Bonds is that there is a US Savings Bonds Tax free rollover provision. US Savings Bonds can be rolled over tax free into Section 529 plan or Education savings accounts.

Rollover U.S. Savings Bonds Proceeds Tax Free into a Section 529 Plan or Education Savings Account

Are you holding U.S. Savings Bonds (Series EE U.S. Savings Bonds or I U.S. Savings Bonds ) that are earmarked for future education expenses of your children?

Under certain conditions there is an opportunity to redeem the U.S. Savings Bonds with no immediate income tax consequence if the entire U.S. savings bond proceeds are contributed to a Section 529 Plan or an Education Savings Account (ESA). It is a U.S. Savings Bonds tax free rollover.

While simply trading a fixed income return (from the U.S. Savings Bonds) for an equity based return (from the 529 Plan) may be an attractive strategy for many people, distributions from 529 Plans and ESA s are free of federal (and often state) income taxes regardless of the parent’s future income level, if the distributions are used for qualifying education expenses, unlike from U.S. savings bonds.

U.S. savings bond interest used for the same purpose, on the other hand, is tax free only if parental income is less then a certain amount in the year of withdrawal.

In order to be eligible for a U.S. Savings Bonds Tax Free Rollover to rollover Savings Bond proceeds into a Section 529 Plan or ESA with no federal tax consequences certain requirements must be met �� including transferor income requirements for the year of the transfer.

If you do not qualify for a tax -free exchange of U.S. savings bonds, you might want to evaluate whether a taxable exchange is suitable given the your circumstances, factoring in the costs and potential benefits of tax free education related withdrawals in the future.

U S Savings Bonds have been in existence for a long time. Some U S Savings Bonds are already discontinued. These discontinued U S Savings Bonds can no longer be purchased. The U S Savings Bonds table below shows some of the U S Savings Bonds that are no longer issued and cannot be purchased.

U S Savings Bonds series	U S Savings Bonds issue period	Notes of U S Savings Bonds
US Savings Bonds series A � US Savings Bonds series D	March 1935 – April 1941	All Us Savings Bonds series A to Us Savings Bonds series D have stopped earning US Savings Bond interest.
Us Savings Bonds series E	May 1941 – June 1980	Some Us Savings Bonds series E but not all Series E Us Savings Bonds have stopped earning US saving bond interest.
Us Savings Bonds series F and Us Savings Bonds series G	May 1941 – April 1952	All series F Us Savings Bonds and Series G Us Savings Bonds have stopped earning US saving bond interest.
Us Savings Bonds series H	May 1952 – April 1957	All series H U S savings bonds over 30 years old have stopped paying interest.
Us Savings Bonds Series J and Us Savings Bonds Series K	May 1952 – April 1957	All series J US savings bonds and series K US savings bonds have stopped earning US Savings Bond interest.
US savings notes	May 1967 – October 1970	US savings notes will stop earning interest in 30 years from the date of purchase of the US savings notes. Some US savings notes may have already reached final maturity.