How to Pay for College With Savings Bonds

Depending on who owns the savings bonds and when they were purchased, you may be able to use them to pay college tuition and fees tax-free.

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My daughter will be going to college in the fall, and I’m starting to get the money together for the first tuition bill. Can I cash in our savings bonds tax-free to pay for college?

It depends on who owns the savings bonds and when they were purchased. To qualify for the tax break, the bond owner must have been at least 24 years old when the bond was issued and must use the money to pay qualified education expenses for himself, his spouse or dependents. The child can be a beneficiary of the bonds but cannot be the owner or co-owner. You can use the bonds tax-free for tuition and fees, but not for room and board.

I bonds and EE bonds issued after 1989 are eligible for the tax break. You must also meet certain income limits. To exclude all of the interest from taxes, your modified adjusted gross income in 2016 must be less than $116,300 if married filing jointly or $77,550 for single filers. You can exclude part of the interest if your income is less than $146,300 if married filing jointly or $92,550 for single filers.

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For more information and help calculating how much of the interest is tax-free, see IRS Publication 970 Tax Benefits for Education. Also see the Treasury Department’s Using Savings Bonds for Education.

Kimberly Lankford
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.