The fine print of the US Savings Bond college education deduction

Monday, June 14th, 2004
Categorized as: Savings Bond college education deductionSavings Bond taxes

The federal government now offers a large number of programs to help you get a college education deduction for yourself or a dependent. And the simple truth is that the ability to deduct US Savings Bond interest from your income when it is spent on education is one of the least attractive options.

The problem with the Savings Bond education interest deduction is that it comes with a large amount of fine print. It’s actually impossible to know whether you’ll even qualify for the deduction when you start investing.

In my book I recommend a completely different way to use Savings Bonds to save for college. Unlike other college savings plans, it minimizes taxes without any limitations and it works whether your child ends up going to college or not.

However, if you already own US Savings Bonds and if you or anyone who’s named on your tax return has college education expenses, you may be able to cash in a bond and deduct at least some of the interest you’ve earned from your income, if you can meet all of the following limitations:

  • You are the registered owner of the bond
  • If there is a co-owner, it must be your spouse
  • Your bond is Series I or Series EE and was issued in January 1990 or later
  • You were at least 24 years old on the issue date of the bond (the first day of the issue month)
  • The college education expenses are for you, your spouse, or a dependent for whom you are claiming an exemption on this same tax return
  • The education expenses are for:
    • tuition and fees (not room, board, or non-degree courses)
    • contributions to a qualified tuition program
    • contributions to a Coverdell education savings account (ESA – also known as an education IRA)
  • You haven’t already used the above expenses for other income-tax related deductions on this return
  • Your income tax filing status is something other than married filing separately
  • Your modified adjusted gross income – including the interest income from these Savings Bonds – is within the income limitations for the Savings Bond education deduction.
  • Finally, the deduction phases out if the amount of money you receive from cashing the bonds (not just the interest, mind you, but the total amount) is more than the eligible education expenses.
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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On October 9th, 2007 D. Gamel said:

I have some EE bonds purchased during the last two years. My daughter is presently already in college. Can I redeem my bonds for the “face value” now or do I have to wait.

On October 10th, 2007 Tom Adams said:

Hi D. Gamel – that would be sweet if we could double our money in two years by buying EE bonds, but unfortunately it doesn’t work that way. Your bonds will take 20 years to reach face value. You can cash them now and get the education deduction on the bit of interest they’ve earned, but after just two years it won’t be much.

Tom Adams

On November 12th, 2007 murray moskowitz said:

Are there ANY circumstances where EE Bonds that I own can be used to pay my Grandson’s College Education without my having to pay the taxes on the transaction? I’m still confused about whether I can transfer ownership or make his parents co-owners or how to pay the tuition and other expenses without having to pay 1/3rd of the Bond’s current worth in Federal/State Income taxes.

Can you help me?

Thank you.

Murray Moskowitz

On November 13th, 2007 Tom Adams said:

Hi Murray – There is NO circumstance under which EE bonds can get a deduction for college education expenses for someone who isn’t a dependent on your tax return.

Making the parents the owners of the bond so they can get the deduction is a taxable event for you.

Making the parents co-owners with you doesn’t work because for this deduction, the person going to college has to be the dependent of both co-owners.

Assuming your grandchild has a low rate tax rate, you could make the grandchild a co-owner and then have the grandchild cash the bond. The 1099-INT will be issued in the grandchild’s name. However, the IRS still says you owe the tax; see Who pays the taxes?.

It boils down to this – the IRS doesn’t want a non-custodial grandparent to be able to get this deduction and it’s had a lot of time to think about all the possible loopholes and block them.

Tom Adams

On November 27th, 2007 Karen Graff said:

My son will be attending college and we would like to cash in some of the bonds we have been purchasing for him to help with his costs. We have several questions: 1.The first bonds were purchased in his name with my husband listed as POD. We were then advised to purchase the bonds in my husbands name with our son as POD. How does this affect cashing them in? 2.Am I correct in understanding that the purchaser is responsible for the taxing of cashed in bonds regardless of who is named as owner? 3.Does the use of money from the bonds for secondary education eliminate paying taxes on that money?4.I assume the money from the cashed in bonds must be used for specific secondary educational costs, such as tuition and not for living expenses, how is that documented? There is so much we don’t understand! We’ve been buying them always with the intent of learning fully about them later – it’s later!
Thanks for your help. I love this website.
Karen Graff

On November 28th, 2007 Tom Adams said:

Hi Karen –

1.) The person who is the owner has to cash the bond. The tax deduction isn’t available on the bonds that name your son as owner, but his tax rate is probably near zero anyhow.

2.) That is not correct. If the person who put up the money for the bond isn’t a named owner or co-owner on the bond, then that person has no responsibility for the taxes.

3.) “Secondary education” means high school and the deduction isn’t available for that. Since you’re talking about your son going to college, however, the tax deduction is available to you within the limits described in the main article above.

4.) The college will send you or your son and the IRS a tax form stating your son’s tuition costs.

Let me know if you have any other questions.

Tom Adams

On December 15th, 2007 W. Woodward said:

Hi Tom,

When cashing in EE Bonds for Education do you count from December of 2006 to December 2007, or is it for the year of 2007.

On December 15th, 2007 Tom Adams said:

Hi W – you offset the interest earned from Savings Bond redemptions during the 2007 calendar year (as shown on the 1099-INT you will receive) with the tuition paid in 2007 (as shown on a tax form the college sends you).

Tom Adams

On December 17th, 2007 Bonnie McGuire said:

Hi Tom,
This year I cashed in Series EE Bonds to pay for my daughter’s college semester. After cashing them in, she decided to wait and not go to school until next Fall! Is there a way that I can minimize the tax liability from cashing them in this year?
Bonnie McGuire

On December 17th, 2007 debby pinker said:

Hope you can help me out, I’ve never been at this site. I have 3 grandchildren and want to purchase savings bonds for them. They will be for school or for them to use in retirement. I want control of the bonds so how do I set up the names. The children are 1, 7 and 12.

On December 18th, 2007 Tom Adams said:

Bonnie – The only other possibility to avoid taxes is to give the money to charity and take a charitable tax deduction to offset the income.

Debby – If you want control of the bonds, you need to put your name on them. However, the IRS says this means you will owe the tax on the bonds when they are cashed. You can put a child’s name on each bond as a co-owner or as a beneficiary.

If you don’t want to pay the tax and if the parents would qualify for the education deduction discussed on this page, then you should put the bonds in a parent’s name. Otherwise, you should use the child’s name. In both these cases, however, you lose all control over the bonds.

Tom Adams

On February 25th, 2008 cynthia said:

I have savings bonds that are in my husbands name as the owner and my son as the pod. My daughter is in college right now and I would like to use these savings bond to pay her tuition. Would I still be able to deduct interest on these bonds (issued after 1/1990) even if the pod is her brothers?. Both kids are dependents on our tax returns.

On February 25th, 2008 Tom Adams said:

Hi Cynthia – yes, assuming you otherwise qualify, you can use the bonds for your daughter’s tuition – the rules for this deduction don’t pay any attention to who the POD is.

Tom Adams

On February 27th, 2008 Ron Anderson said:

I want to purchase I Bonds for my grandaughters education (she’s 1 yr old) and list her as the beneficary. The bonds will be in my son’s name but I will retain them so that they cannot be cashed in prior to attending college (if she decides to attend college). I have looked at 529 pre-paid college plans and believe that I Bonds are more of a conservative and safe saving tool.

On February 28th, 2008 Tom Adams said:

Ron – Your plan makes good sense to me.

Tom Adams

On March 6th, 2008 Martha Starr said:

We purchased EE bonds about 12 years ago because I was told we would not be taxed if they were used for college tuition/fees. We have 3 in college and I cashed some in in 2007 and 2008. I pulled up the Income Limits section here and am a little confused. If our adjusted gross income is less than $98,400 in 2007, can we still take the deduction? It states that it begins to phase out at the low end – how can I tell how much is deductible and is there some document I can use for back-up? Thanks a lot.
Martha Starr

On March 7th, 2008 Tom Adams said:

Martha – when you do your taxes, you have to fill out IRS Form 8815 to take the deduction. That form takes you through the phase out calculation for income, as well as another one that compares how much you got from cashing the bonds with how much you spent on tuition.

Tom Adams

On May 1st, 2008 Julie said:

My daughter is not going to use the savings bonds for education. She is still in high school. The bonds are both E series and the older ones. The bonds are listed in both our names. I want her to cash in the bonds in her name and avoid taxes under her low income status. Is that possible?

On May 1st, 2008 Tom Adams said:

Julie – if your daughter cashes the bonds herself, the 1099-INT tax form reporting the interest to the IRS will be issued with her Social Security Number.

On May 20th, 2008 Matt said:

I have bonds in all of my kids’ names (gift to them from relatives). I want to cash them & put the money into their 529 instead of the bonds. Hoping to get a higher rate of return over the years until college is in our picture. Will I have to pay taxes on the bonds? If I send the bond statement to the 529 plan they tell me I will not pay taxes? These bonds are in their names, not a parent or relative. They are age 10 and under. Thanks!

On May 21st, 2008 Tom Adams said:

Matt – since the bonds are in the names of the children rather than your name, they are not eligible for the deduction, as the article above explains.

Moreover, since the children are 10 and under, what they earn in interest goes on your tax return. So you’ll have to pay the taxes on what the bonds have earned so far.

Tom Adams

On May 22nd, 2008 Jeff Frese said:

I started a company that lets anybody in your circle of friends and family gift directly into your child’s 529 plan. So instead of another Barbie Doll or shirt from the Gap people can gift into your child’s plan. It’s a simple site and concept that helps people save for college and give meaningful gifts. The site is

I also write a blog on saving for college the site is

On June 2nd, 2008 Bob Feyl said:

I received EE savings bonds from my grandmother who passed away last year. She listed me as a co-owner along with herself. I have not yet redeemed the bonds. This year I have a tuition bill. Can I claim the education tax exclusion if I were to redeem these bonds this year?

On June 4th, 2008 Tom Adams said:

Bob – if you meet all the other limitations listed above you can use the deduction. Since your grandmother has passed away, the bond is now the equivalent of sole-owner bond with only your name on it. However, you still have to have been 24 when the bond was issued, not when your grandmother died, as well as meet all the other limitations.

Tom Adams

On June 20th, 2008 Mike said:

Hi, Tom –

I am hoping you can help me with this question: how can I redeem a EE bond for my children on which I am named POD?

I am in the process of moving my their bond assets into other instruments. Yesterday I brought them to the bank and it turned out that about half of them have me named as POD (I had no idea what that meant). They told me the bonds could only be redeemed upon my death, which seemed a little impractical to me. Not sure if it matters, but all of my children are minors. Do I have any options?

Thanks in advance for any help you can provide!


On June 24th, 2008 Tom Adams said:

Mike – See these two posts on POD and cashing your child’s Savings Bonds.

Tom Adams

On June 28th, 2008 Mardi Ybarra said:

My daughter will be attending college in the fall. While her father and I were married, he purchased series EE savings bonds through his employer from Jan. 1989 to Sept. 1993. They are all in his name alone. What is the best way to transfer the mature bonds to our daughter for her tuition needs that will limit or eliminate any taxable interest income on them. Can they be gifted to her and then she pays tax at a lower rate? Thankyou for your help.

On June 30th, 2008 Tom Adams said:

Mardi – gifting the bonds to your daughter will be a taxable event for her father. But if the father can claim the daughter on his tax return and he otherwise meets the limitations, he can take the deduction. Information is at the top of this page. Otherwise, the money can still be used for college, but there’s no tax deduction.

Tom Adams

On July 26th, 2008 Kim Gedney said:

Mr. Adams —

Thanks for this highly significant information –the 2004 “Fine Print” article and follow-on, linked material. My bubble, however, has been burst.

I am a federal government employee who’s been purchasing EE bonds twice monthly since 1996 for the college expenses of my two dependent children. (Actually, there are four; the older two graduated a few years ago and we’re still paying off their loans.)

When I signed up to purchase the EE bonds, I understood the interest earned by the bonds would not be taxed if the proceeds — both principal and interest — were devoted to college-level education expenses. I see now from your article that I have been misled and deceived — and am furious that the US Government failed to advise me of the “fine print” elements you have described.

My son recently graduated; while he’s been in school the past four years we have been borrowing funds for his education (Stafford unsubsidized loans for him, Parent PLUS loans for his mother and me). Now that he’s finished, I have been intending to cash in the bonds to pay off the loans.

Because our married-filing-jointly return for 2007 taxes showed an adjusted gross income in excess of $130,000, I’m presuming our AGI for 2008 will be at a similar level. Here’s where my bubble has burst: Despite my unswerving participation in the USG program for the past 13 years — thinking all along that EE bonds for college education were interest-free, I now find that my income PRECLUDES me from benefitting from the program’s major and highly touted benefit, i.e., tax-free earnings.

I’m also retiring in the fall. Although our son is a dependent for 2008, he’s not likely to maintain that status in 2009. If I wait until next year to cash the bonds — when my income may be lower — then his non-dependent status disqualifies us from the tax deduction (right?).

I believe this situation to be entirely inequitable — primarily from the perspective of false advertising. For 13 years I have relied upon the federal government to fulfil the terms of this social contract — that this program would eliminate the federal tax factor in funding my children’s college educations. Now I see the interest from these government instruments will be taxed and then promptly returned to government coffers. The effect is to negate much of the interest that’s been accumulating.

It’s as though we’ve been scammed.

Are there provisions by which we may properly avoid the tax consequences of this sorry, sorry situation ?


Kim Gedney

On July 28th, 2008 Tom Adams said:

Kim – Your understanding is correct – if the student isn’t a dependent on the return on which you take the deduction, the IRS will deny the deduction.

There is no way to get out of the income limitation except to have less income.

However, since you’re retiring in the fall, that will help to get you under the threshold. Another thing that might help to reduce your income would be stock market losses.

Tom Adams

On July 30th, 2008 WendyYasaki said:

Hi Tom, After reading your article I am still confused about rolling over an I Bond to a 529. You list an education expense as a contribution to a qualified tuition program. We fall into the income limits stated.

We have an I Bond that is valued at much more than the tuition costs for one year of tuition. So I am thinking it would be advantageous to roll it over into a 529. Will I be required to fill out a 8815?
And once in the 529 are we then eliminated from dealing with paying taxes on the interest? Hope I am making some sense!

On July 31st, 2008 Tom Adams said:

Wendy – assuming your 529 plan is a Qualified Tuition Plan or QTP, you can cash the bond and put the money in the QTP.

Yes, you would use IRS Form 8815 to remove the Savings Bond interest from your taxable income when you file the rest of your tax forms for the year you made the switch.

You have another option, which is to partially redeem the I bond (get some of it in cash and the rest in a smaller denomination I bond). The Treasury will do this but it’s an unusual transaction – your bank may have a good laugh at your expense when you tell them that’s what you want to do.

Tom Adams

On August 1st, 2008 Janet said:

I have a question about how to distribute HH Bonds to my mother’s marital trust. My dad just passed away and my my mom is going to get some of the estate to be passed into my dad’s marital trust. The bonds are titled in my dad’s living trust with me as co-trustee…Can I request that the check for the HH bonds be made out to my dad’s marital trust for my mothers benefit? OR does the check have to be made out to my dad’s living trust, with me signing my name as trustee (which is the title on the HH Bond as owner), and do I give my SS # or the marital trust EIN # ? Also I think I goofed by cashing some EE Bonds today and having the check made out to me. I am the trustee of the family trust and marital trust. I was hoping to cash the EE bonds into my moms marital trust, as she has over $60,000 in deductible expenses at the asst. living facility (which would minimize the taxes to be paid on these bonds). I had the check made out to myself and put my SS number on the check…can I sign the check over to my dad’s marital trust with a diff EIN #, and let the marital trust pay the taxes, or am I stuck now paying the taxes on the interest of these EE Bonds?? These trust issues seem tricky. Also, I’m having quite a time trying to find the form to cash the HH Bonds. The Form is called “Request by owner of reissue of United States Savings Bond” -do you know how to find this form? .. I can’t find it anywhere on the Treasury Direct Web site. Thanks so much for your help!

On August 2nd, 2008 Tom Adams said:

Janet – this site has pages about HH bonds and about Trusts; it would be better to read those first then if you still have questions ask on those pages rather than on this page about college education tax deductions. See HH bonds and trusts and estates. You’d also find my book to be quite helpful.

Tom Adams

On August 30th, 2008 Tina said:

Hi Tom,
I want to buy a savings bond for my granddaughter who will be turning 1yrs old. Do I put it in my name and she as the beneficary. Or the savings bond in her name and let her do with it what she will when she turns 18. I didn’t know which way to go to avoid the tax issue.


On September 2nd, 2008 Tom Adams said:

Tina – Since I get emails every day from people who have lost their Savings Bonds and from families fighting over them, I don’t think Savings Bonds make particularly good gifts.

But if you are making a large gift and you want it to be used for college and to be tax deductible, the first-named owner should be one of the child’s parents. If either the grandparent or the child is a co-owner, the bond can’t be used for the college education deduction.

Tom Adams

On September 8th, 2008 Robyn said:

Hi Tom,

When married my ex and I had purchased numerous EE Savings bonds from 1986-1991. All of the bonds were registered jointly. Either he was owner and I was joint or visa-versa. Now these bonds have been equally divided and sitting safely in a vault upon our divorce.

My question is now that our son’s are going to college I would like to use these bonds to pay for their qualified tuition expenses. Can I use my bonds from prior years or does it need be from January 1990 or later to get the deduction? Better yet am I even entitled to this deduction and what exactly is it? Do I meet the requirements? I know that each of us are able to claim one child as our dependent on our tax return. Please advise, I’m so confused.

Thanking you in advance for your assistance


On September 8th, 2008 Tom Adams said:

Robyn – only the bonds issued in January 1990 and later are eligible for the deduction, so most of yours don’t qualify on this basis, but some do.

What exactly is it? If you qualify and you fill out your tax forms correctly, the deduction means you don’t have to pay income tax on the interest the bonds have earned. Without the deduction, you have to pay the income tax in the year you cash the bond.

Only you can figure out if you meet the requirements. There’s an income limitation (see link above).

You can only use the deduction if the person whose tuition expenses you are paying for is a dependent on your tax return. If the child you are declaring as a dependent is in college and you otherwise qualify ( and if it’s to your advantage – there are better tax deductions the first few years of college) then you should take the deduction.

Tom Adams

On October 17th, 2008 Genie Olsen said:

What form do I use to change an I Bond purchased by me about 8 years ago. I wish to gift the bond solely to a minor. Is it true that it is the minor that is responsible for paying the taxes on the bond when he cashes it in.( I asume for college) Do I also have to pay the tax on the interest or is it solely the child’s responsibility?

On October 20th, 2008 Tom Adams said:

Genie – That’s not how it works. You and the IRS will get a 1099-INT reporting the interest under your SSN for the time you owned the bond. When the minor cashes the bond, she will get a 1099-INT for all the interest the bond has ever earned.

Around here we call that the double taxation trap. She doesn’t actually owe all that tax – she can make manual entries on her tax form to remove the interest you’ve already paid taxes on, but it rarely happens that way.

The section of this site on Savings Bond registration changes has the form you’re looking for.

Tom Adams

On October 20th, 2008 Genie Olsen said:

Thanks Tom for the information. As I understand it, as soon as I reliquish my bond to a minor or the minor’s mother, I am responsible for the taxes, even if they use it for education.

Another thought.. Is it possible to transfer the bond to the minor’s EdVest account or Coverdale without me paying the taxes on the interest.

If nothing else works, then I can just pay the tax and take my capital gains loses on some mutual fund stocks to balance the tax on bond interest.

On October 21st, 2008 Tom Adams said:

Genie – If by “relinquish” you mean have the registration changed, then yes.

If the minor is a dependent on your tax return, you could in fact cash the bond and put the money in a Qualified Tuition Plan for the minor’s benefit and get out of the taxes that way. There’s more info on that here. This doesn’t work, however, if the minor isn’t a dependent on your tax return.

Savings Bonds pay interest, not capital gains, and you can’t directly offset interest earnings with capital gains losses, but you can always take a limited amount of capital gains losses against your income each year and you can carryover excess losses to later years.

On October 24th, 2008 Genie Olsen said:

This is pretty clear Tom. As you advised others, I as a grandparent must pay the tax on interest on the I bond for my grandson and then gift it for his education next year.

One last question..An Aunt who died 10 years ago left a bond for this same grandson. Her estate has been liquidated. When said grandson cashes in this bond, will he have to pay the taxes, which of course would be at a lower rate, due to no or little income on his part.?

On October 24th, 2008 Tom Adams said:

Genie – yes, the grandson would pay the income tax.

On October 27th, 2008 Rick Stevenson said:

Tom – I am looking for a second opinion: My reading of IRS Pub 970/Form 8815 states the interest of cashed EE bonds will be included in one’s MAGI when doing a rollover to a QTP. In my case, my cashing of EE bonds to fund the kids’ 529 plan not only puts me over the $100,650 breakpoint where the interest exclusion starts to phase out but also over $130,650 married MAGI ceiling resulting in me having to pay taxes on the entire EE interest.

Like a previous poster, I feel somewhat hoodwinked by the government’s Savings Bond tax fine print thinking a EE-to-QTP rollover would have no tax consequences. Knowing what I know now, I would have either just cashed the bonds when I needed them for tuition or made smaller QTP rollovers to avoid hitting the $100,650 threshold.

On October 28th, 2008 Tom Adams said:

Rick – It looks like the pertinent line from Pub 970 is For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return without taking into account this interest exclusion.

To me that says your reading is correct – the Savings Bond interest income has to be included in your MAGI when calculating whether you are eligible for a deduction.

(I’m adjusting the article at the top of the page to make this point clearer.)

Tom Adams

On January 5th, 2009 Mel said:

I had a couple questions regarding using Savings Bonds for college education. My parents have purchased savings bonds for me ever since 1982. I am attending graduate school now and wish to apply my savings bonds to my education, in hopes that it will be a tax deduction. I file my own taxes seperate from my parents – will I have the tax deduction or will my parents? Also, should I save the reciepts noting that I have used my savings bond money for my tuition? Also, above, you had mentioned 24 years old being a requirement. That age limit is regarding my parent (or who purchased the savings bond, correct?) Also, you mentioned above that the bond can recieve a deduction if the series was 1990 or later – what about series that were issued earlier? Are they not eligible for deduction?

On January 6th, 2009 Tom Adams said:

Mel – Assuming the bonds are in your name, you can’t use the deduction because you weren’t 24 when the bonds were issued. If the bonds are in your parents name, they can’t use the deduction because you’re not a dependent on their return. Checkmate IRS.

Savings Bonds issued before 1990, or from a Series other than EE or I, are not eligible for the deduction.

Tom Adams

On February 24th, 2009 Cindy said:

My husband and son cashed in my son’s savings bonds and the bank issued the interest on my husband’s social security number because my son did not have a bank account at that bank. Is there any way to fix this? We do not want to claim his interest on our taxes.

On February 24th, 2009 Tom Adams said:

Cindy – the info you’re looking for is here.

Tom Adams

On March 20th, 2009 Gwen said:

I have been buying EE bonds as gifts for my child for many years. All are registered in my name. I do not qualify for the interest exclusion for college expenses because of my high income. Because these were intended to be gifts, can my 20 year old child cash them and have the interest taxed at her lower tax rate. Thanks!

On March 20th, 2009 John P. Clancy said:

Hello: Can I use my 21 bonds(EE & I)interest for a tax free collage education guift to my first cousins children’s children and thier children.? I have set up a Trust Fund to recieve my estate and making it the beneficiary of my bonds.The Trust Fund will be giving money yearly to these relatives. I hope my Trust Fund will last a long time.

On March 23rd, 2009 Tom Adams said:

Gwen – intended to be gifts is legally meaningless. You are the sole owner of the bonds and your child has no legal basis to cash them.

John – There is no way either you or your Trust can get the Savings Bond college education deduction because neither of you meets the requirements outlined above. Have you looked into a Qualified Tuition Plan (QTP)? If the children are young, cashing the bonds and putting the money in a QTP for their benefit might work, but I’m not an expert on QTPs.

Tom Adams

On March 31st, 2009 John Gash said:

My granddaughter started college in 2008 and use US saving bonds to pay tution and board. The total cost was around 40000 dollars. She cashed in the bonds so the 1099-int is in her name. about 16000$ was interest from the bonds and the bonds was given to her by number of relative with her name and her brother on some of the bonds, her name and mine on some, others with varous aunts and uncle. Would not the best way to report the interest is on my grand daughter 1040, do you agree.

On March 31st, 2009 Tom Adams said:

John – Yes, you’ve got it. Because of the way the bonds are registered, she can’t get the tax deduction, but her tax rate is probably very low. So she should declare the income on her own 1040.

One tricky thing here is whether she should be claimed as a dependent on her own return or on her parents’ return (it can only be one or the other, not both). You should calculate the taxes both ways to see what the lower total tax is.

Tom Adams

On April 1st, 2009 Robb said:

Here’s my question.. I have savings bonds in my name. My wife went back to finish her degree in 2005-2006. we took out student loans to pay for her college. Can I now turn bonds in to pay off student loans? they have been purchased after 1990 and are in my name.

On April 2nd, 2009 Tom Adams said:

Robb – sorry, using Savings Bonds to pay off student loans doesn’t create a tax deduction on the Savings Bond interest.

Tom Adams

On April 11th, 2009 Joan said:

Can you explain the significance of the 1989 issuance date? Any reason this was used instead of a earlier year? I have EE bonds issued prior to this date and had planned on using them of college expenses for my son.

On April 13th, 2009 Tom Adams said:

Joan – I don’t know the significance of the date other than that’s what Congress put in the law allowing this deduction.

Tom Adams

On May 6th, 2009 David said:


My wife has EE bonds and is wanting to cash some of them in to use for buying her first house. If she does that are the taxes less?

On May 7th, 2009 Tom Adams said:

David – no, there is no Savings Bond tax benefit for buying a house.

Tom Adams

On May 27th, 2009 Garen Wisner said:

I have several bonds that I bought (above age 24) that the “To” lists my dependent daughter with “Or” of my name (e.g. co-owners). The SS# lists my daughter but as I understand this means nothing.

If I satisfy all the other rules and use this for qualified educational expenses for my dependent daughter is the interest non-taxable? Form 8815 states: “A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child.”

On May 31st, 2009 Tom Adams said:

Garen – To be eligible for this deduction, this bond would have to have you and your spouse as co-owners, not you and your daughter.

Tom Adams

On October 21st, 2009 Andrew Smith said:

Hi Tom,

Thank you for providing such invaluable information on this site.

My question: I have EE Series bonds in my name, my son is currently in college and I want to pay for his tuition using the bonds. However, my ex-wife pays for the tuition and then I write her a check for my portion of my son’s tuition. Do I have to pay the college directly for the tuition to get the tax benefits? What’s the best way to go about this?

Thank you for your help.


On October 22nd, 2009 Tom Adams said:

Andrew – in order to get this deduction, your son would have to be listed as a dependent on your tax return.

If that’s the case, you only have to show that the tuition expenses were paid. Typically colleges issue tax forms to the student showing how much tuition was paid.

Tom Adams

On November 14th, 2009 Louis Egnatowich said:

I am 81 years of age and all my dependents have died or moved out. I want to pay for their siblings education, but they don’t live with me and aren’t a dependent on my taxes.

On November 16th, 2009 Tom Adams said:

Louis – you can pay for their education, but you don’t qualify for the tax deduction. So hold back what you’ll need for taxes.

Tom Adams

On December 29th, 2009 bill dunlap jr said:

I purchased EE bonds on a regular monthly basis from 1980 thru 1990 in varying denominations ranging from $50 to $1000 in my name and my son’s name. I’m 72.
1.If I choose to cash some or all of them in, how is it accomplished?
2. Can I gift these bonds gradually to my son in the IRS permitted amounts thereby making him responsible for tax consequences?
3. Is there some way to assign POD status to these bonds?
Thanks for your consideration.
Bill Dunlap Jr

On December 30th, 2009 Tom Adams said:

Bill – Info on cashing bonds in is here. If your son is already listed as a co-owner, just have him cash the bond. He’ll get the 1099-INT reporting the interest to the IRS. As co-owner, your son already has POD rights. To put on someone else as POD you’d have to remove your son as co-owner.

Tom Adams

On January 12th, 2010 Julie said:

we have 1991 up to 1995 bonds. My son is currently in college. Should I use them now or wait? he has 3 more years to go.

On January 13th, 2010 Tom Adams said:

Julie – if you don’t need to use them now, wait another year.

There are other college-related tax deductions that you can use in the first year or two of college and you can’t use both those and the Savings Bond deduction in the same year.

You will understand the wide range of deductions and when to play the Savings Bond card better after you’ve done your taxes for 2009.

Tom Adams

On January 18th, 2010 Donna said:

Hi Tom,

My son received various EE and I bonds from 2005-2009. I looked up their redemption value (from your calculator) so I know what they are worth today. My question is, am I able to cash them? My son is only 4 1/2 years old. We will not be using it for educational purposes. Also, can you explain the tax I would have to pay? And approximately how much it would be for bonds worth $50, & 75 and $100. My husband and I file our taxes jointly.

The savings bonds are made out to my son and my husband. Am I able to cash them since we share a joint account or do I need to have my husband sign them? And, if so, does he need to do it at the bank?

Will I pay a penalty for cashing any bonds early? I have both I and EE bonds. I’m just really confused with all of the “rules” for bonds.


On January 20th, 2010 Tom Adams said:

Donna – Technically speaking, you (because you are a custodial parent) are allowed to sign for your son. But because your husband’s name is on the bonds, some banks might ask that he sign. He would have to go to the bank to sign. So you really need to ask your bank if they will allow you to sign for your son.

Because the bonds are so new, you will be paying an early redemption penalty of the most recent three months interest. The penalty has already been deducted from the redemption amounts you’ve looked up.

The IRS will want you to add the interest these bonds have earned to your income. Because the bonds are so new, the amount of interest is likely to be quite small. The amount of tax you’ll have to pay depends on your other income, but in any case it wouldn’t be more than about one-third of the interest amount and is likely to be closer to zero.

Tom Adams

On February 7th, 2010 Lucy said:

It is very helpful to read your forum and articles.

I have some EE saving bonds,and my son is the co-owner. He cashed them last year and got about $2,000 in interest. He is in graduate school now. How can he deduct this interest from his tax filing. He is not 24 years yet, and he is also claim as my dependent.And also his taxable income is just above the $5500.

If not be able to deduct, he seem need to pay full tax for this interest?

On February 8th, 2010 Tom Adams said:

Lucy – Because he was co-owner, the education deduction isn’t available to him. He will have to add the income to his tax return. There are other educational deductions available, however, and I’ll be surprised if he actually has to pay any tax.

Tom Adams

On March 7th, 2010 Sunny said:

I cashed in some EE savings bonds and deposited all the proceeds into a 529 plan for my daughters. I file as head of household, with the interest from the bonds I have an AGI of 80480. I received bad advice about depositing the money into the 529 plans (my daughters are currently attending college). So I took a distribution from the 529 plans to pay for my daughters education. Am I allowed to exclude the interest from my income and/or will I be able to take the AOC credits for either daughter?


On March 8th, 2010 Tom Adams said:

Sunny – In general, what you’ve done qualifies for the Savings Bond education deduction. You qualify by income and putting the funds into a 529 plan works.

If there’s a problem, it would have to do with how many education credits you can take in a single year. I’m not sure what you mean by AOC credits, but I know the tax law has several different ways to deduct education expenses but you can’t use them all at the same time.

I would assume that the credit for using the Savings Bond income to fund a 529 plan would be available separately from the other education credits, but I’m not an expert in tax law so I don’t know for sure.

Tom Adams

On March 15th, 2010 Troy said:

Do you have hold EE bonds for a minimum period of time before you can roll them over to a 529 Plan? My 6-month old daughter has several EE bonds with me listed as the co-owner. The bonds were only issued a few months ago, but I would like to roll them over to a 529 Plan that I already set up for her. The 529 Plan is in my name with her as the beneficiary. I feel that I can get a better rate of return over the next 18 years if the money from the initial bond investment was put in to the 529 Plan because of the low interest rate on the bonds and the fact that she would have to wait until she turns 20 to get the full face value of the bonds.

On March 16th, 2010 Jim Reif said:

All three of my children (18, 16, 12) have separate EE savings bonds and I’ve collected monthly $100 EE savings Bonds from work from 1989 to 2000. Each of my children also have a 529 college saving plan through Delaware. My question is this: My eldest son is graduating HS in June and is attending PSU in the fall and he’s going to need his and some of my Savings Bonds. I would like to roll everyone’s bonds, including mine, into their personal 529 college plans. Can I do this without getting penalized? Thanks!


On March 16th, 2010 Tom Adams said:

Troy – You can’t cash Savings Bonds before they’re a year old, but other than that there’s no minimum.

Jim – As the article at the top of the page points out, you’d get the benefit of deducting the Savings Bond interest from your income for tax purposes by doing that. I don’t know what kind of penalty you’re worried about, but I can’t think of any.

Tom Adams

On March 18th, 2010 Bruce Miller said:

Tom- My son is 25 and a few months ago cashed in some Series EE bonds to pay for his past semester’s tuition at a Community College. The bonds were bought by his grandparents but were in his name. While doing his taxes with tax software (Turbotax)it stated none of the interest is deductable and has to be included as income on his return. The bad thing for me is by adding the bond interest to his income it puts his income at $3850, which is $200 above the limit for claiming him as a qaulifying relative on my tax return. Are we out of luck?

On March 18th, 2010 Tom Adams said:

Bruce – Since the bonds were in your son’s name, they are not eligible for the Savings Bond education deduction, so for that part you’re out of luck.

As for whether you can claim him as a dependent or not, that’s a tax question, not a Savings Bond question, and I couldn’t say whether you’re out of luck or not.

Tom Adams

On April 9th, 2010 marcia niec said:

Tom, The bulk of my bonds are dated pre 1990. Am I to understand that bonds I have, dated before 1990, are not eligible for a interest savings (on our taxes) if used for funding my kids pre-paid college fund? Say it isn’t so. Thanks for this site and your time. Marcia & Paul

On April 9th, 2010 Tom Adams said:

Marcia – Sorry, it’s so.

Tom Adams

On April 17th, 2010 jdj said:

Hello Tom,

I have a question about your alternative to the College Education Deduction that you outline in chapter 14 of your book.

If I were to I-bonds for my child starting the first year of his life, choosing to use the Accrual Basis Reporting and filing an annual tax return, is it possible that, in theory, no taxes would ever be due on these I-bonds if the amount of interest annually was below the IRS unearned income threshold ($950 in 2009)?

I’m thinking that each year there is no tax due on accrued interest as long as it’s under that $950 threshold, but my child files a return each year reporting it nonetheless. Then when the bonds are redeemed, when reporting the 1099, I note “U.S. Savings Bond interest previously reported” and enter all the interest I have reported over the years.

Am I correct in my assumption that no taxes would be owed at redemption, since the interest has been reported every year but taxes were never due since it didn’t meet the IRS threshold?

As always, thanks for the great book and website.

On April 19th, 2010 Tom Adams said:

JDJ – yes, as long as the interest earned by the bonds each year is under the threshold for the kiddie tax (which would require you to put the interest on your return), that’s how it works.

Tom Adams

On May 23rd, 2010 Mark DiMartino said:

My mother, now deceased bought several EE and I bonds for my son who is now 22. She put the bonds in her name primarily and my sons name. There is one bond made out in his name with her name to mail to: and my name. Is there any hope here for the tax deduction?

On May 24th, 2010 Tom Adams said:

Hi Mark – No, there’s no hope. The registration the bonds have doesn’t meet the requirements of the deduction.

Tom Adams

[…] The fine print of the US Savings Bond college education … – The federal government now offers a large number of programs to help you get a college education deduction for yourself or a dependent. And the simple truth is that … […]

[…] The fine print of the US Savings Bond college education … – The federal government now offers a large number of programs to help you get a college education deduction for yourself or a dependent. And the simple truth is that … […]

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

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