Series EE Savings Bonds--Taxation

[RetireeRobert]

Is there any way series EE savings bonds bought in 1986 can be cashed in "tax-fee" if the proceeds are used for higher ed expenses (or any other way for that matter)? These were bought before the time of the so-called "education savings bonds" (which i think started around 1990).

 

[Martha]

Unfortunately, your bonds are too old.

Publication 970 (2006), Tax Benefits for Education

Who Can Cash In Bonds Tax Free

You may be able to cash in qualified U.S. savings bonds without having to include in your income some or all of the interest earned on the bonds if you meet the following conditions.

• You pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return.
• Your modified adjusted gross income (MAGI) is less than $78,100 ($124,700 if filing a joint return).
• Your filing status is not married filing separately.

Qualified U.S. savings bonds. A qualified U.S. savings bond is a series EE bond issued after 1989 or a series I bond. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners).

 

[Miss_Lala]

I cashed in about $10,500 in bonds earlier this year. Will I get a statement telling me how much interest I earned, or do I just have to guess a number on the tax sheets?

 

[BigBob]

I cashed in about $10,500 in bonds earlier this year. Will I get a statement telling me how much interest I earned, or do I just have to guess a number on the tax sheets?

When I cashed mine in last year(2006), I received a statement at the time of cashing them in at the bank that included all of the information I needed for taxes. I believe I also received a 10-something statement from the bank at the end of the year.
Yeah, I was pretty angry about having to pay taxes on it, as it was used for college tuition.
Check out this thread on converting to a 529 plan.
http://www.early-retirement.org/forums/f28/savings-bonds-529-a-30710.html

 

[clifp]

I managed to claim the educational expense for savings bonds last year, but I was amazed at the steps required to claim the deduction as outline in the IRS pub.

I had to do some last minute tax fiddling to get my modified AGI below the limit and even then the exclusion was reduced enough that we are only talking a few hundred worth of tax savings.

The 529 "rollover" seems like much better option.

 

[martyb]

I cashed in $6500 worth of EE bonds this year myself. I know I'll have to pay taxes on that money, but what I did with the money will more than make up for the extra taxes. I was able to add 4 1/2 years to my future govt. pension by buying back my active duty military years.

 

[Helena]

If you have older paper bonds they may be paying a
decent rate of interest... so you might think twice
before cashing them in... yet.


Here is link to saving bond calculator:

Calculate the Value of Your Paper Savings Bond(s)