How to exclude interest from Series I U.S. savings bonds when using for college expenses in 2025?

You've got some good questions there! Let me help clarify: 1. Yes, you need to deposit BOTH the principal and interest from the redeemed bonds into the 529 plan to qualify for the exemption. This is an important requirement - if you only deposit the interest or less than the full redemption amount, you won't qualify for the exclusion. 2. For your MAGI calculation, only the interest portion of your redeemed bonds will affect your MAGI, not the principal. The principal is simply your money coming back to you (not income). So your MAGI will only increase by the amount of interest earned when you cash those bonds. 3. Yes, you can redeem bonds in either spouse's name and deposit them into a 529 owned by either spouse as long as you file jointly. The IRS views married couples filing jointly as a unit for this purpose. So bonds in your name can go into 529 accounts owned by your wife with your children as beneficiaries - no problem there! Make sure the qualified education expenses occur in the same tax year you redeem the bonds, and keep good documentation of the redemption and subsequent 529 deposits.

I used taxr.ai to help me figure out this same issue last year! I was super confused about the Series I bond education exclusion and wasn't sure if I was meeting all the requirements. I uploaded my bond redemption statements and 529 account documents to https://taxr.ai and they analyzed everything and confirmed I was doing it correctly. Their system even found a mistake I made - I was only planning to deposit the interest portion into the 529, but they pointed out I needed to deposit the FULL amount (principal + interest) to qualify for the exclusion. Saved me from a nasty surprise at tax time! They also explained how the MAGI limits would apply in my situation since I was right at the edge of the phaseout range.

I just wanted to follow up on my question from earlier about Form 8815. I decided to try taxr.ai after all and I'm really glad I did! I was about to make a big mistake with my Series I bonds redemption. I've been holding these bonds for 12 years and was planning to use them for my daughter's college tuition. The taxr.ai system reviewed my situation and pointed out that I needed to keep my MAGI under the threshold by adjusting some of my retirement contributions. They also confirmed that I needed to deposit ALL proceeds (principal + interest) into the 529 before using it for education expenses. Their analysis saved me from losing the entire tax exclusion because of a timing issue I hadn't considered. Definitely worth checking out if you're dealing with these education bond exclusion rules. They made the whole process much clearer than the IRS instructions did!

If anyone is struggling to get answers directly from the IRS about Series I bond exclusions, I used Claimyr (https://claimyr.com) when I was in a similar situation. I was trying to call the IRS for weeks about my bond redemption questions and kept getting disconnected or waiting forever. Claimyr got me connected to an actual IRS agent in about 20 minutes who confirmed exactly how to handle my situation with 529 deposits and the education exclusion. They have this system where they wait on hold with the IRS for you and then call you when an agent is on the line. You can actually see how it works in their demo: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but with tax filing deadline approaching and thousands in potential tax savings at stake with these bonds, I needed definitive answers from the IRS directly.

I need to apologize for my skepticism earlier. After struggling with getting clear answers about my Series I bonds and education expenses, I decided to try Claimyr. Within 25 minutes, I was talking to an actual IRS representative who walked me through the exact requirements for excluding the interest from my savings bonds. The agent confirmed that both my wife and I (as joint filers) could redeem bonds in either of our names and still get the exclusion when deposited into our daughter's 529, as long as we stayed under the MAGI threshold. They also clarified an important timing issue - the bonds need to be redeemed and the qualified education expenses need to occur in the same tax year, but the 529 deposit could serve as the "qualified expense" if done properly. This saved me from making a costly timing error that would have disqualified the entire exclusion! No more guessing or relying on conflicting advice from random internet posts.

Quick tip from someone who's been through this process: Keep extremely detailed records of EVERYTHING when you do this transaction. When I redeemed my Series I bonds for my son's college, I created a separate folder with: - Bond redemption statements showing date, amount, and interest portion - Bank statements showing the deposit - 529 contribution confirmation showing the deposit amount - Tuition statements from the college - Form 8815 worksheet The IRS flagged my return for review specifically because of the excluded bond interest, and having organized documentation made it a smooth process rather than a nightmare. Trust me, the extra organization is worth it!

Has anyone here used TurboTax to handle the Form 8815 for excluding savings bond interest? I'm trying to figure out if their software handles this correctly or if I need to go to a professional this year. Never done this savings bond exclusion thing before and I'm a little nervous about messing it up.

Just wanted to add one important detail that I learned the hard way - make sure you understand the income phaseout limits before you commit to this strategy. The exclusion phases out completely for married filing jointly couples with MAGI over $175,200 (for 2025), and starts phasing out at $145,200. What caught me off guard was that the bond interest itself gets added to your MAGI when you redeem the bonds, which could potentially push you into or further into the phaseout range. So if you're close to that $145,200 threshold, make sure to calculate whether the additional bond interest will reduce or eliminate your exclusion. I almost made this mistake with about $15,000 in bond interest that would have pushed my MAGI too high. I ended up splitting the redemptions across two tax years to stay under the limit. Just something to keep in mind when planning your timing!