Pay attention to the dates older Series EE and Series I savings bonds were issued to determine eligibility for tax breaks

As college tuition gets more expensive, some Americans holding Series EE and Series I savings bonds may be wondering about the tax implications of cashing them in for educational purposes. According to government Web site Treasury Direct, individuals that hold these bonds may be eligible for an education tax exclusion if the bonds were issued after 1989.

In order to exclude all or part of the interest following the redemption of the bonds, the funds must be used to pay for "qualified higher education expenses at an eligible institution," according to the Web site.

The funds must be used for qualified expenses - tuition and fees, expenses for sports or activities associated with a student's degree program, and expenses that benefits the bond holder, spouse or dependent for whom an exemption is claimed. Costs associated with books or room and board are not considered qualified expenses.

Additional eligibility rules apply to this process and should be addressed in detail with an individual's tax preparer. A tax service will be able to go through the steps with the bond holder and help them fill out the necessary paperwork.

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Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

Posted To: Tax Ranger's Blog By: Tax Ranger On: Tuesday, July 13, 2010
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