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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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My wife and I want to cash in bonds to pay for our childs

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My wife and I want to cash in bonds to pay for our child's college tuition. WE live in Maryland and our child attends a Maryland State college.The bonds are EE bonds and they are either made out to my wife, or my child. Both names are XXXXX XXXXX the bond either TO, or OR, and I am not sure how to tell the difference if one is a beneficiary, or a co-owner of the bond. My wife and I file a joint tax return and our incomes combined exceeds 200K.

Can we cash the bonds in and pay for the tuition without claiming the bond amount, or its interest as income on our tax return.

Robin D :

Hello and thank you for using Just Answer,
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 (as co-owners). Bonds with your child's name as anything other than the beneficiary will make the bond nonqualified if you want to cash it in and use for education (without paying the tax on the interest).


If there are two names separated by OR, that bond has a co-owner registration. Either co-owner can cash the bond without the permission of the other. However, the IRS says the income tax on the interest earned by the bond should be paid by the principal owner, which it defines as the person who put up the money to buy the bond.
If there are two names separated by POD, that bond has a beneficiary registration. POD means payable on death.


WOW!! Bad news for us. The names are XXXXX XXXXX a OR, no POD on the bond. The OR makes my child a co-owner thus I would have to pay tax on the interest when I cash them in. Am I understanding correctly?

Robin D :

That is correct, unfortunately.

Robin D :

Of course you would still have the Education credits to assit with the added income from the interest.

Robin D :

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