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Savings Bonds

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Savings bonds have long been a way for parents to begin saving early for their child’s college education. But in 1990 the Treasury Department made saving for college an even better deal. Through the introduction of the Education Bond Program, interest that is earned on Series EE and Series I Bonds can be completely tax deductible if the money earned is used to pay for eligible college expenses in the same calendar year in which the bond is redeemed.

When bond money is used to pay for tuition to a state college or university, it may also be eligible for the tax deduction. There are certain qualifications and some of those qualifications must be met when the bonds are purchased, so make sure you have all the information before buying the bonds of your choice. For example, parents must be at least 24 years old before the purchase of the bonds and the child’s name must not be listed as a co-owner of the bond. However, the child can be named as a beneficiary of the bond money and still qualify.

Money earned from these bonds does not have to be used for education expenses unless the parents wish to claim the tax deduction on the interest from those bonds. Not every college related expense qualifies for the tax deduction. Tuition and fees are qualified expenses, but books, room and board, and meal plans are not.

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