Education Savings Bond Program
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 use it to pay for qualified higher education expenses for yourself, your spouse or a dependent for whom you claim an exemption on your return.
Income Limits
Your modified adjusted gross income in 2006 must be less than $78,100 ($124,700 if filing a joint return).
Qualified U.S. Savings Bond
A qualified U.S. savings bond is a series EE bond issued after January 1, 1990 or a series I bond.
Eligibility
You must have paid qualified higher education expenses for yourself, your spouse or a dependent for whom you claim an exemption on your return. Your filing status cannot be married filing separate return. 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). The owner must be at least 24 years old before the bond’s issue date. The issue date is printed directly on the front of the savings bond.
Qualified Expenses
Qualified higher education expenses include tuition and fees required to enroll at or attend an eligible educational institution, contributions to a qualified state tuition program and contributions to a Coverdell Education Savings Account (ESA) you pay for either yourself, your spouse, or a dependent for whom you claim an exemption. Qualified expenses do not include expenses for room and board or for courses involving sports, games or hobbies that are not part of a degree program. Generally, you must reduce the qualified expenses by the amount of any tax-free educational assistance you received as well as any expenses used in figuring the Hope and Lifetime Learning tax credits and tax-free withdrawals from a Coverdell ESA.
Eligible Educational Institutions
Eligible educational institutions are any college, university, vocational school or other postsecondary educational institution eligible to participate in student aid programs administered by the United States Department of Education.
Tax Form
To calculate the exclusion of interest from savings bonds, see Internal Revenue Service Form 8815.
For additional information on the Education Savings Bond Program, see Internal Revenue Service Publication 970 and the U.S. government savings bond web site.