Is interest from EE bonds not cancelled by 1089-t education expenses which exceed the bond interest if you don't also get an education credit?

Forum|Forum|2 years ago
April 7, 2024
2 replies
0 views

I don't get an education credit because someone else claims me, but they have also never claimed an education credit in my stead. My 1089-t education expenses do count toward cancelling my Coverdell ESA but they aren't cancelling my EE bond interest even though I used those bonds to pay the remaining school expenses (which are more than the bonds). I used the EE bonds to pay for education, and showed I have excess education expenses, so why is the system still counting them as regular income?

TurboTax Free Edition Online

AmyC

Employee

I doubt you qualify -due to age. Here are the rules from Pub 970:

Who Can Cash in Bonds Tax Free?

You may be able to cash in qualified U.S. savings bonds without having to include in your income some or all of the interest earned on the bonds if you meet the following conditions.

You pay qualified education expenses for yourself, your spouse, or a dependent.
Your MAGI is less than $98,200 ($154,800 if married filing jointly).
Your filing status isn't married filing separately.

Qualified U.S. savings bonds.

A qualified U.S. savings bond is a series EE bond issued after 1989 or a series I bond. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners).

The owner must be at least 24 years old before the bond's issue date. The issue date is printed on the front of the savings bond.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Hal_Al

Employee

Q. Is interest from EE bonds not cancelled by 1098-T education expenses which exceed the bond interest if you don't also get an education credit?

A. Yes, if you other wise qualify. But, you apparently don't. Basically, it's the parents of students that get to use Savings bonds for education, not the students themselves, because of the age at purchase rule.

The expenses have to exceed the entire bond amount, not just the interest. Room and board (R&B) are qualified expenses for an ESA distributions, but not for Savings bonds.

If you savings bonds, an ESA, scholarships and are claiming a tuition credit, you have to allocate the expenses among those sources. You cannot count the same expense for more than one tax benefit (no double dipping).