Form 8815 and Savings Bonds Rollover to 529 (QTP)

Forum|Forum|6 years ago
February 1, 2020
3 replies
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Hello,

During 2019 we redeemed Series I US Savings Bonds (issued after 1989) and within 60 days, rolled over the entire proceeds to a Qualified Tuition Plan (QTP - 529 plan).

How do I process this in TurboTax Premier so the interest remains untaxed due to the rollover?

Thanks,

Confused parent

Hal_Al

Employee

Enter the 1099-INT at the the interest income section. TurboTax (TT) will detect that it is savings bond interest and ask about education expenses.

At the screen "Tell us if any of these uncommon situations apply"", do NOT check the box "I need to adjust the taxable amount". Click yes when asked if you used your bonds to pay for higher education expenses (the fine print tells your QTP counts). At the "Report educational expenses and benefits" screen, enter the amount of the QTP contribution as "Qualified higher educational expenses paid in 2019". At the "Additional Bond Information" screen, you enter the cashed bond info.

ColoradoFamilyAuthor

Thanks for your prompt and helpful response.

glenj03-gmailcom

3. Excludable interest on series EE savings bonds issued after 1989. attach form 8815

Schedule B - I cashed US EE savings bonds with $50,000 interest. all the bonds were purchased after 1989.

can i exclude some of this interest?

Hal_Al

Employee

@glenj03-gmailcom You haven't provided enough info. It depends on how the bonds are registered (whose name they're in). It depends on your MAGI. As previously stated, the savings bond interest is included in calculating MAGI. So, having so much interest could disqualify you or reduce the amount of interest that qualifies. Of course you must also have qualifying educational expenses, for you, your spouse or your dependents, including timely 529 contributions.

The exclusion benefit is phased out in 2021 for modified AGI of $82,350 to $97,350 (unmarried) and $122,550 to $153,550 (married).

References: https://www.treasurydirect.gov/indiv/planning/plan_education.htm

https://www.investopedia.com/ask/answers/111414/what-education-savings-bond-program.asp#:~:text=An%20education%20savings%20bond%20program,from%20their%20annual%20gross%20income.

https://thismatter.com/money/tax/education-savings-bonds-program.htm

kkattumadam

I redeemed some Treasury I bonds in 2021 and moved the funds to a qualified QTP (college 529) account within 60 days. I cannot take an interest deduction due to MAGI exclusions. The 1099-INT workflow forces me to enter an institution name and address and I entered QTP and the 529 account's mailing address but then in the final federal review, it flags in form 8815, that these fields must be blank. If I proceed to blank it, the validation in the previous workflow of entering the 1099-INT as QTP flags it saying that I must enter the institution name and address. I am in an endless loop with this.

I chatted with a live TT expert and she is stumped as well and promised to get back to me in a day or two. Worst case, send me a desktop version of TT which apparently works fine. Any clues from the community?

Hal_Al

Employee

I'm stumped as well. The usual solution is delete the 1099-INT and start over. But, in your case there's a simple solution. Since you're not eligible for the USSB interest exclusion, just answer no when asked if you used the bonds for education, and avoid that part of the interview.

Even when TT does it right, it's going to generate a form 8815 that says you don't qualify. That form will not be sent to the IRS as part of your tx return.

Since, you're not getting the interest exclusion, your entire contribution to the 529 plan should have been identified as "Basis". None of it should have been called 'earnings", since the earnings portion (interest) is being taxed. Be sure the contribution was identified that way, so you don't risk being taxed twice if for some reason the 529 plan is not all used for education in the future.