Can i bonds be used for education

See IRS Form for the current amount. You were 24 or older before your savings bonds were issued. Savings Bonds That Qualify for the Exclusion To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after in your name, or, if you are married, they may be issued in your name and your spouse's name. We can do this. Treasury Department, offer a low-risk and modest-return investment for college saving.

And as long as the bonds are used to pay for qualified college expenses, the interest earned is generally free of federal, state, and local taxes.

If purchased early in the student's life, they provide a safe, guaranteed return once college rolls around. Bond buyers must be at least 24 years old. Parents can purchase bonds for their children, but the bonds must be registered in the parent's name.

The dollar amount of bonds purchased must not exceed annual limits. The interest earned on series EE and Series I bonds can be used tax-free for college if the following conditions are met:. In essence, you cash in the savings bonds and "reinvest" them in the ESA or account.

You may deduct the interest earned on the bond s from your gross income for the tax year you completed the transfer. You can also cash in your savings bonds and simultaneously take distributions from an ESA or plan—just as long as both distributions are used solely to pay for qualified education expenses. The advantage for many relatives giving these bonds is that one cannot lose the principal and the money is difficult to access while the child is young, ensuring that the bonds will be used for their intended purpose.

A special exemption in the tax code called the Savings Bond Education Tax Exclusion allows you to avoid taxes when cashing in certain types of savings bonds for college if the money is being used for higher education expenses.

In order to qualify, you must pay for your college expenses during the same tax year in which the bonds are redeemed. Due to the restrictions on cashing in savings bonds for college, many people want another option.

One solution for this problem is depositing or rolling the savings bonds into a plan. A account is a tax-deferred savings account that can be used to cover college expenses. While the money that is deposited into these accounts comes from after-tax wages, the investments in the account can grow tax-deferred. As long as the student uses the money for college, taxes will never have to be paid on these profits.

For this reason, many parents, grandparents, and other relatives prefer to buy bonds through a plan. In order to roll savings bonds into a plan, the bonds must first be sold or redeemed. As long as this money is then deposited into a plan within 60 days, the money will not be taxed. Accessed Feb. The first requirement is that the bonds must have been issued after to a person who was at least 24 years old before the bond's issue date. Therefore, parents or grandparents must be the owners of bonds used to pay for the educational expenses.

Also, to qualify for the tax break, your income not your child's, even if he or she is the one in college must be below certain limits. If you can meet these requirements, a bond that was issued in your name or your spouse's name qualifies if you paid higher education expenses for yourself, your spouse, or your dependent children.