Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: I have a client who purchased Series EE U.S. Government Savings Bonds to fund her children’s education.  The bonds are maturing now.  What are the tax consequences?

Answer: The owner of a Series EE bond pays tax on the bond at the time of its maturity or disposition, unless the election was made to recognize the growth as taxable on an annual basis.

The taxpayer may claim an exemption from income for those amounts paid for qualified higher education expenses paid in the same calendar year as the recognition of bond income.  Qualified higher education expenses for this purpose include tuition and fees with respect to a degree-seeking curriculum.  It does not include amounts paid for room and board.  The amounts may be paid for the taxpayer, spouse or dependents.

Here’s a link to the IRS Instructions for claiming the higher education expense bond interest exemption on IRS Form 8815.

https://www.esmarttax.com/2010-federal-form-8815-instructions.asp

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