Series EE bond into PA 529

Forum|Forum|4 years ago
August 4, 2021
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I have a series EE bond issued to me from my grandmother that has matured (Aug'21), I was 8 at the time it was issued. I now would like to roll it over into my own children's PA 529s, however everything I've read eligibility wise to do this to avoid tax indicates it would have needed to be issued after I myself turned 24. I'm trying to understand if I cash it and then within 60 days deposit all of the funds into their 529 accounts, will I be hit with the tax bill/need to send in estimated taxes?

Also looking ahead to taxes, anything special I need to know when filing?

Thanks,

Confused Parent

Not A Product Question

Hal_Al

Employee

You are correct, that bond does NOT qualify for the exclusion of interest used for educational purposes (the age 24 rule). As such, it does not qualify for a tax free (or tax deferred) roll over to a 529 plan. If you cash it, you have to report the interest as income.

Because it has matured, you'll have to report the interest, whether you cash it or not. If you do cash it, you will get a form 1099-Int (in January 2022), which will make tax reporting easier.

Paying estimated taxes is essentially optional. You can wait to pay when you file your tax return. There will be no under payment penalty as long as:

- 1. You owe less than $1,000 in tax for 2021, after subtracting your withholding and credits

OR
- 2. Your withholding and credits are more than the smaller of: 90% of the tax to be shown on your current year’s tax return, or 100% of the tax shown on your prior year’s tax return. (110% if your income will be more than $150K) .

100% of the prior year tax liability is the “safe haven”