Education Savings Bond Interest Exclusion and Form 8815

A taxpayer may exclude some or all interest when redeeming qualifying Series EE bonds issued after 1989 or Series I bonds and paying eligible higher-education expenses. The bond owner must meet age, ownership, filing-status, and income tests, and the expense must be for the taxpayer, spouse, or dependent at an eligible institution. Form 8815 calculates the exclusion and prevents the same education expense from supporting another tax benefit.

Eligible bonds and owner age

The education savings bond program generally covers Series EE bonds issued after 1989 and Series I bonds. The bond must be registered to the taxpayer alone or jointly with a spouse, and the owner must have been at least 24 years old before the bond’s issue date. A parent who registers a bond in a child’s name when the child is under 24 generally cannot use that bond for the parent’s exclusion. The bond’s issue date and registered owner matter more than who eventually uses the proceeds.

The bond does not need to mature in the year tuition is paid, but interest is recognized when the bond is redeemed if the owner has been deferring interest. The taxpayer generally must file a return and cannot use married filing separately. Bond ownership in a trust, a child’s name, or another entity may change who can claim the exclusion. Keep TreasuryDirect records or bond certificates showing issue date, owner, co-owner, and redemption.

Qualifying education expenses

Qualified expenses generally include tuition and required fees for the taxpayer, spouse, or a dependent at an eligible postsecondary educational institution. Room and board, books, sports or hobby courses not part of a degree or certificate program, and other nonqualifying costs do not count under this exclusion. Expenses must be paid in the same tax year the bonds are redeemed, subject to the rules for adjustments and educational assistance.

Qualified expenses are reduced by tax-free scholarships, employer-provided educational assistance, tax-free distributions from 529 or Coverdell accounts, and expenses used for education credits or other deductions. The same dollar cannot generate a savings bond exclusion and an American Opportunity or Lifetime Learning credit. A family should map all tuition and fees across bonds, 529 funds, scholarships, and credits before redemption.

Compute the excludable interest

If adjusted qualified expenses are at least as large as bond redemption proceeds, all interest included in those proceeds may be excludable, subject to the income phaseout and other requirements. If proceeds exceed adjusted expenses, only a proportion of the interest may qualify. The ratio is generally adjusted qualified expenses divided by the total redemption proceeds, multiplied by the interest portion of the proceeds. Principal is not income; only the interest component is potentially excluded.

Example: a taxpayer redeems bonds for $9,000, including $3,000 of interest, and has $7,650 of adjusted qualified expenses. Before any MAGI phaseout, the excludable amount is $3,000 × $7,650 ÷ $9,000, or $2,550. The remaining $450 of interest is taxable. This proportionate formula prevents the taxpayer from treating all bond interest as excluded when redemption proceeds exceed qualifying tuition.

Apply the MAGI phaseout

The exclusion phases out over a modified adjusted gross income range that changes with inflation. For 2025, the range is $99,500 to $114,500 for most non-joint filers and $149,250 to $179,250 for married filing jointly; no exclusion is allowed at or above the top. Married filing separately is not eligible. Modified AGI begins with AGI and adds back specified exclusions and deductions, including foreign income exclusions and student loan interest deduction, so it may differ from AGI shown on the return.

The phaseout is applied after identifying the otherwise excludable interest and expenses. Do not confuse the MAGI thresholds with those for education credits, student loan interest, or Roth IRA contributions. The IRS updates the thresholds each year. Publication 970 and Form 8815 instructions for the year of redemption contain the controlling worksheets and should be checked before filing.

Use Form 8815 and coordinate reporting

Form 8815 is used to calculate the amount of bond interest excluded from income. The result is reported on Schedule B, and the taxpayer should retain the bond redemption statement, tuition invoices, proof of payment, scholarship records, and calculations showing which expenses were allocated to which benefit. TreasuryDirect may provide tax reporting information, but the taxpayer remains responsible for matching the redemption to the eligible education expense.

If interest was reported annually as it accrued rather than deferred until redemption, the rules and tax basis in the bond need separate analysis. A taxpayer cannot simply use Form 8815 to reverse prior interest that was already taxed. If only part of the interest is excluded, the remaining interest is taxable in the redemption year.

Compare bonds with 529 accounts and education credits

Savings bonds are an older tax-advantaged education funding tool, while 529 plans and education credits have different eligibility, contribution, investment, and distribution rules. Bonds have an owner-age requirement and an income phaseout; 529 funds can be used for a broader set of qualified expenses under their statute but carry account-specific ownership and distribution rules. The best funding source depends on how assets were titled, family income, tax credits available, and the timing of tuition.

The household should first determine whether the student qualifies as the taxpayer’s dependent, which person owns each bond or account, and how much tuition remains after scholarships. Then compare a bond exclusion with available credits and tax-free 529 distributions. Preserve expenses for the most valuable benefit, while avoiding double use. A bond redemption should be timed with actual expense payment and the taxpayer’s MAGI year.

Common errors and exam method

Common mistakes include using a bond issued in the student’s name, ignoring the age-24-at-issue requirement, counting room and board, overlooking the MAGI phaseout, and allocating the same tuition to both bonds and a credit. Another error is applying the ratio to total proceeds rather than the interest amount. The owner and filing status also matter.

For an exam, identify bond series and issue date, owner age on issue date, registered owner, beneficiary relationship, eligible tuition paid in redemption year, tax-free assistance and other benefits, MAGI, filing status, and the interest-to-proceeds ratio. Then determine the excluded amount and taxable balance.

Practical planning checkpoint

Redemption timing can determine whether the exclusion is available. A household may redeem only enough bonds to align proceeds with tuition in the same year, but it should account for the entire proceeds denominator and any other bonds redeemed that year. A large redemption in a high-MAGI year may make the exclusion smaller or unavailable. The owner can compare partial redemption, waiting, and 529 resources, but should not let tax treatment disrupt a student’s enrollment or cash needs.