Using U.S. Savings Bonds For College Savings
BOSTON (CBS) - The Education Bond Program was the first program available to offer any kind of a tax break for parents trying to save for college.
Both I Bonds and EE Bonds purchased after 1990 can be used for the Education Bond Program. This program allows a tax exclusion for savings bonds' interest when used to pay for college tuition and fees. There are some strict requirements to meet.
The bonds must be in the parent's name, not the kid's. The child can be the beneficiary just not an owner or co-owner. If grandma wants to gives the kids savings bonds for college, she needs to purchase them in mom or dad's name.
The person purchasing the bonds must be over age 24. The costs of books and room and board are not considered qualified expenses.
You are not required to indicate that you intend to use the bonds for educational purposes when you buy them, so you can be saving for college in a 529 plan and have a stash of savings bonds as a backup. The bonds are in the parent's name so they are not considered an asset owned by the child for financial aid.
There are income limits as to who can use the program. These limits are for the year you cash in the bonds, not the year you are purchasing them. For this year, single taxpayers have the ability to use the bonds tax-free if their income is under $74,700 but not more than $89,700.
For married couples filing jointly the income tax exclusion are $112,050 and $142,050.
You can only purchase these bonds online thru the Treasury's website or through programs where you work. Paper bonds are no longer available.
You are limited to the number of bonds you can purchase annually; $10,000 of face value for each type of bond. There is no limit to the amount you can accumulate though.
