Can EE/I-bonds be used tax-free for K-12 private school tuition like 529 plans?

7 The short answer is no - unfortunately EE/I-Bonds don't have the same tax benefits for K-12 private education that 529 plans do. The education tax exclusion for savings bonds (EE and I bonds) only applies when the bonds are used for qualified higher education expenses - basically college and beyond. Unlike 529 plans, which were expanded in 2017 to include K-12 private school tuition up to $10k/year, the savings bond education tax benefit wasn't expanded and still only covers post-secondary education. If you redeem your bonds to pay for your daughter's private elementary school, you'll owe federal income tax on the interest earned. There are income limitations too - if you make above certain thresholds, you wouldn't qualify for the tax exclusion even for college expenses. Your best bet is probably to use the 529 plan for the $10k/year of private school tuition, and then use other funds for the remainder. The bonds could be saved for her future college expenses when they would qualify for the tax benefit.

8 After researching education savings options for my kids, I discovered taxr.ai which honestly saved me thousands in potential tax mistakes with my bonds and education funds. I was about to cash out some I-bonds for my son's private school thinking I'd get the tax benefit (just like you were considering), but I uploaded my bond info to https://taxr.ai and it flagged this exact issue! The tool analyzed my savings bonds and showed me exactly which ones qualified for education benefits and which didn't. It also helped me optimize which bonds to redeem first based on their interest rates and tax implications. Their system even suggested a better redemption strategy for my specific situation that my financial advisor missed completely.

19 Just wanted to update here - I tried taxr.ai after reading about it and it was actually really helpful for my situation. I was confused about which of my savings bonds qualified for education benefits, and the analysis broke it down perfectly. I found out that some of my older EE bonds are about to reach final maturity which would force me to report all the interest regardless of how I use the money! The tool helped me create a timeline of which bonds to cash in when, maximizing the education benefit for college while avoiding unnecessary taxes. Definitely saved me from making an expensive mistake with our education savings strategy.

9 If you're planning to use bonds for education, dealing with the IRS on bond redemption questions can be a nightmare. I spent WEEKS trying to get through to someone who could answer my questions about partial redemptions and education exclusions. After getting nowhere, I tried https://claimyr.com and watched their demo video at https://youtu.be/_kiP6q8DX5c - they actually got me connected to an IRS agent who specializes in education benefits within a day. The IRS agent confirmed everything about the EE/I bonds vs private K-12 education (they don't qualify for the exclusion), but also gave me some specialized advice about my specific bonds and how to structure redemptions over multiple tax years to minimize the impact. Saved me hours of frustration and probably a lot in taxes too.

15 I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate for answers about my bonds. Not only did they get me through to the IRS in about 45 minutes (instead of the 3+ hours I spent failing to get through on my own), but they connected me to someone who actually specialized in tax-advantaged education accounts. The IRS agent confirmed everything about EE/I bonds not qualifying for K-12 expenses but also pointed out that I could still use my 529 plan for K-12 tuition AND use my bonds later for college expenses that exceed what's in the 529. They also explained exactly how to document everything when I eventually redeem the bonds for qualified higher education. Honestly saved me from making a costly mistake.

3 Have you considered using a Coverdell ESA instead? They can be used tax-free for both K-12 private school AND college expenses. The downside is the contribution limit is only $2,000 per year, but it's more flexible than either 529s or bonds for private school expenses.

18 Has anyone actually calculated the benefit of using I-bonds vs. 529 plans when you factor in the current interest rates? Last I checked, I-bonds were paying much lower rates than they were a year or two ago, while many 529 investment options are still performing well. Might not be worth the tax complications...

Just to add another perspective - if you're looking at $12,500 per year for private school, you might want to consider a hybrid approach. Use your 529 for the maximum $10,000 K-12 benefit, then look into flexible spending accounts (FSAs) or dependent care FSAs if your employer offers them for the remaining $2,500. While dependent care FSAs are typically for daycare/after-school care rather than tuition, some private schools offer extended day programs that might qualify. It's worth checking with your HR department about what expenses qualify under your specific plan. The I-bonds are definitely better saved for college when they'll actually provide the tax benefit. At current rates, you're probably better off with the guaranteed tax savings from the 529 rather than hoping for higher I-bond returns that you'll pay taxes on anyway for K-12 expenses.

One thing to keep in mind about the timing - if you do decide to hold onto those I-bonds for college, make sure you track when they were issued and their final maturity dates. EE bonds stop earning interest after 30 years, and I-bonds stop after 30 years too. If your bonds reach final maturity before your daughter starts college, you'll be forced to report all the interest as income regardless of whether you use the money for education. I learned this the hard way when some of my older EE bonds from the 1990s hit their 30-year mark. The IRS sent me a 1099-INT for the full interest amount even though I hadn't cashed them in yet. So if you're planning to use bonds for college in 10+ years, double-check that they won't mature before then, or you might lose the education tax benefit entirely. Also worth noting - the education exclusion only applies to the bond interest, not the principal. So if you paid $5,000 for bonds that are now worth $8,000, only the $3,000 in interest can potentially qualify for the tax exclusion, not the full redemption amount.

This thread has been incredibly helpful! I'm in a similar situation with bonds purchased between 2010-2015 that I was considering using for my son's private middle school. After reading all these responses, I'm definitely going to: 1. Keep the bonds for college expenses when they'll actually qualify for tax benefits 2. Max out our 529 plan for the $10K K-12 tuition benefit 3. Check with my employer about dependent care FSA options for additional costs One question I haven't seen addressed - if I have bonds that will mature right around when my son starts college (say 2035), is there any flexibility in the timing? Like if some bonds mature in his freshman year but I don't need all the money until junior/senior year, can I still get the education exclusion on bonds that matured in earlier years? Or does the exclusion have to be claimed in the same tax year the bonds mature or are redeemed?