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?
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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
-
JPMorgan's Drop Drags on the Dow: Stock Market TodaySmall-cap stocks outperformed Tuesday on expectations that the Fed will cut interest rates on Wednesday.
-
Why Playing It Safe in Retirement Is a Big RiskFear of losing money could actually cost you in retirement. Find out why being too conservative with your life savings can hurt you and how to stop that from happening.
-
Tax Refund Alert: House GOP Predicts 'Average' $1,000 Payouts in 2026Tax Refunds Here's how the IRS tax refund outlook for 2026 is changing and what steps you can take now to prepare.
-
It’s Not Too Late to Boost Retirement Savings for 2018retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
When You Can Expect to Receive Your Tax Refund
taxes The quickest way to receive your tax refund is to file electronically and have the money directly deposited into your bank account.
-
How a Move Can Change Your 529 Plan Tax Deduction
529 Plans The tax deduction you get for contributing to your state’s 529 plan can disappear if you move to another state.
-
Tap an IRA Tax-Free With an HSA Rollover
IRAs You can convert tax-deferred money in a traditional IRA into tax-free cash by rolling it over to a health savings account and using it to pay for medical bills.
