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Financial Planning / Tax Strategies
|Subject: Re: savings bonds and education||Date: 2/6/2013 10:40 AM|
|Author: TMFPMarti||Number: 117651 of 122522|
I have a small collection of EE/I bonds. They are all well over 5 years at this point. The vast majority of the value is in the I bonds which are 2001 vintage (i.e. a pretty good rate). The EE bonds are all maturing in 2013-2014.
Is the interest federally taxable as income (25% for me) or long term capital gains (15%)?
It's ordinary income interest, not a cap gain.
Before spending too much time on the calculation intricacies, make sure that the bonds qualify. From Pub 970:
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 co-owners).
The owner must be at least 24 years old before the bond’s
issue date. The issue date is printed on the front of
the savings bond.
If the bonds are qualified you start with your qualified expenses and reduce them by the amount you take as a tuition deduction. The balance is available for exclusion of savings bond interest.
All the details are in Pub 970.
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