Ask Terry Questions I bond tax-free for college?

I bond tax-free for college?

By Terry Savage on April 12, 2023 | College Savings / Student Loans

Hi Terry,
I want to purchase an I bond for my 8th grader and hold it at least the 5 yr period or longer to then cash in for his college. I read where if used for higher Ed, you don’t have to pay tax on gains?
But do I open the I bond in my name? Or my son’s for this option?
Also I don’t know the income cut off line for being able to use this option ?
but my husband and I may be close or over that threshold- so does it make more sense to put in my son’s name or mine?

Thank you,

Terry Says

Honestly, it makes more sense to open a 529 college savings plan for your child’s college. Read this:

If you’re in a state like Illinois, you even get a break on state taxes for contributions up to $10,000.

As for using your savings bonds for education (tax-free), the income level changes every year — and the eligibility would be determined by your income in the year you use the bonds. Here’s the income level for 2022, for example:

Your modified adjusted gross income is less than $98,000 if single, head of household or qualifying widower, or $124,800 if married filing jointly (in 2022). This number typically increases each year and IRS Form 8815 shows each year’s exclusion.

The bonds must be purchased in the PARENT’s name!



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