33.4 United States Savings Bond Tuition Plans

Consider the use of Series EE bonds (30.14) or I bonds (30.15) to fund part of a college savings program. You can defer the interest income until final maturity (30 years) or report the interest annually. At redemption, the interest is not subject to state or local tax. For bonds purchased in your child’s name, having your child report the interest annually may be advisable where it can be offset by the child’s standard deduction or itemized deductions. To the extent interest is offset each year, it escapes tax (4.29).

Interest exclusion may be available if you redeem EE bonds issued in your own name after 1989 or I bonds.

If you purchased EE bonds (30.14) in your own name or jointly with your spouse after 1989 and have been deferring the reporting of interest income, you may be able to exclude accumulated interest from federal tax in the year you redeem the bonds if in that year you pay tuition and enrollment education fees or you contribute to a Coverdell ESA (33.11) or qualified tuition program (QTP, 33.5). The interest exclusion rule also applies to redemptions of I bonds (30.15). The exclusion, claimed on Form 8815, is subject to several limitations as discussed in the following paragraphs.

Who qualifies for the exclusion.

You must have been age 24 or over before the month in which the bonds were purchased, and the bonds must have been issued solely in your name or in the joint names of you and your spouse. You may not claim the ...

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