Did You Know? TAX TIP

If you have any old U.S. Savings Bonds tucked away somewhere, now might be the time to review them for the current interest rate, maturity date and accrued interest. One advantage of owning U.S. Savings bonds (Series I or EE) is the tax deferred treatment of the interest.  However, if you have owned the bonds for a long time, there could be significant interest accrued which is taxed as ordinary income upon liquidation.

One lesser known advantage is the tax free treatment when used for college education expenses upon meeting certain IRS requirements.  You might think, “But my children don’t have any current education expenses.” Fortunately, a 529 education savings plan falls under the scope of “qualified” education expenses. Therefore, qualifying bond proceeds used to fund a 529 plan will exempt the interest from tax. An additional benefit is available for those living in a state which gives tax deductions for 529 education plan contributions. This strategy has income limitations and additional requirements per IRS and state guidelines, so please contact your advisor to review if you qualify for the tax free treatment of the interest and state deduction.

For more information, visit treasurydirect.gov.

This entry was posted in $1$s. Bookmark the permalink.