You might be able to avoid paying taxes on the interest of some bonds if the money is used for qualified expenses. By Kimberly Lankford, Contributing Editor March 6, 2013 I plan to use some of my series EE savings bonds toward my daughter’s college tuition, and I would like to avoid paying taxes on the interest from the bonds. But I see that the tax break disappears when a couple’s modified adjusted gross income is above $142,050 in 2013. How is modified AGI different from AGI? SEE ALSO: 7 Smart Ways to Pay for College The definition of modified adjusted gross income varies depending on the tax break, but generally it means taking your adjusted gross income from the bottom of page 1 of Form 1040 and adding back certain deductions and exclusions. For the education savings bond program, for instance, you would take your adjusted gross income and add back any deduction you took for student loan interest and for tuition and fees, plus any exclusion for adoption benefits you received from an employer’s adoption-assistance program. You’d also add back some less-common deductions and exclusions, such as for foreign income. For the full list, see IRS Publication 970, Tax Benefits for Education. I bonds and EE bonds issued after 1989 are eligible for the tax break. To qualify, you -- the bond owner -- must have been at least 24 years old when the bond was issued, and you must use the money to pay qualified education expenses for yourself, your spouse or a dependent. Tuition and fees qualify; room and board do not. Advertisement The interest exclusion gradually phases out when your 2013 modified adjusted gross income on a joint return is between $112,050 and $142,050, or between $74,700 and $89,700 for single filers and other types of returns. (For 2012, the phase-out is between $109,250 and $139,250 for joint returns and between $72,850 and $87,850 for single filers and other types of returns.) For more information, see the U.S. Treasury’s Using Savings Bonds for Education fact sheet. Got a question? Ask Kim at email@example.com.