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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10159
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Have I series Treasury bonds to use daughters college. Do we

Customer Question

Have I series Treasury bonds to use for my daughters college. Do we pay taxes on the bond when used for her education?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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I hold J.D. (Duris Doctorate -a Doctoral degree in the law), MBA (Finance & Tax specialization), a BBA from Mercer University's Stetson School of Business & Economics, as well as CFP and CRPS (Chartered Retirement Plans Specialist) designations

I can help here

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Expert:  Lane replied 1 year ago.

Yes.

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The Education Savings Bond Program permits qualified taxpayers to exclude from their gross taxable income income the interest earned on the redemption of eligible Series EE and Series I bonds issued after 1989. You must be at least 24 years old before the bond's issue date. To qualify for this exclusion, the taxpayer, the taxpayer's spouse, or the taxpayer's dependent at certain post-secondary educational institutions must incur tuition and other educational expenses

Expert:  Lane replied 1 year ago.

Again, this applies only to Series EE and Series I bonds issued after December 31, 1989.

Expert:  Lane replied 1 year ago.

IRS Form 8815 ( https://www.irs.gov/pub/irs-pdf/f8815.pdf )includes the necessary worksheet and instructions for taxpayers to use with your tax return.

Expert:  Lane replied 1 year ago.

Please let me know if you have bany questions at all

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Hope this has helped

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If this HAS helped, and you If you don't have additional questions on this, I'd appreciate a positive rating (by clicking the stars on your screen) ... that's the only way I'll be credited with a portion of what you've paid JustAnswer.
...

Thank you,

Lane

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Customer: replied 1 year ago.
do you know the interest rate we will have to pay?
Expert:  Lane replied 1 year ago.

Not sure I understand ... do you mean the taxable interest that you receive if you DON'T use for education?

Expert:  Lane replied 1 year ago.

The interest is compounded semiannually. Every six months from the bond's issue date, all interest the bond has earned in previous months is in the bond's new principal value. Interest is earned on the new principal for the next six months. For example, in month seven, interest is earned on the original price plus six months of interest. In month 13, interest is earned on the original price plus 12 months of interest.

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The interest rate will depend on when the bond was issued

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The interest on I bonds is a combination of

  • a fixed rate, and
  • an inflation rate

To see the current value of your bonds, use the Savings Bond Calculator. (from the dept of treasury)

Expert:  Lane replied 1 year ago.

Here's an example for treasury of how the composite rate (the combination of (1) the fixed rate that was fixed based on when you bought the bond, and (2) the inflation rate thats added to it) works.

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An example

The composite rate for I bonds issued November 1, 2015 April 30, 2016, is 1.64%

Here's how we set that composite rate:

Fixed rate0.10%

Inflation rate0.77%

Composite rate = [fixed rate + (2 x inflation rate) + (fixed rate x inflation rate)][0.0010 + (2 x 0.0077) + (0.0010 x 0.0077)]

Composite rate [0.0010 + 0.0154 + 0.0000077]

Composite rate 0.0164077

Composite rate 0.0164

Composite rate 1.64%

Expert:  Lane replied 1 year ago.

Still with me?

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Questions?

Expert:  Lane replied 1 year ago.

Here's where you can find all if this (Dept of treasury's web site for I bonds): https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#interest

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Hope this has helped

...

If this HAS helped, and you If you don't have additional questions on this, I'd appreciate a positive rating (by clicking the stars on your screen) ... that's the only way I'll be credited with a portion of what you've paid JustAnswer.
...

Thans you,

Lane

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Expert:  Lane replied 1 year ago.

Hi,

….

I'm just checking back in to see how things are going.

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Did my answer help?

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Let me know…

….

Lane

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