U.S. Savings Bonds

U.S. savings bonds are an extremely low-risk investment, completely exempt from state taxation.

Savings bonds sell for less than their face value and may be redeemed at fixed intervals for fixed amounts. The increase in value over the purchase price is reported as interest income on your tax return, either each year or at redemption.

If you redeem Series EE bonds purchased after 1989 in your own name to pay for an immediate family member's college expenses, you may be able to exclude the interest altogether from your taxable income. This benefit is phased out as income levels increase. To see if your income level qualifies, see below:

Provision Single Married Filing Jointly

Child Tax Credit1

Starts at $200,000 AGI2

Starts at $400,000 AGI2

Adoption Credit

$211,160 - $251,160 AGI

Same as single

Interest on Education Loans

$70,000 - $85,000 AGI

$140,000 - $170,000 AGI

Education Tax Credits
(a) Hope Scholarship Credit
(b) Lifetime Learning Credit

(a) Starts at $80,000 AGI
(b) Starts at $58,000 AGI

(a) Starts at $160,000 AGI
(b) Starts at $116,000 AGI

Coverdell Education Savings Accounts

$95,000 - $110,000 AGI

$190,000 - $220,000 AGI

Education Savings Bonds

$81,100 - $96,100 AGI

$121,600 - $151,600 AGI

Individual Retirement Accounts (IRAs)
Active participants in another plan $64,000 - $74,000 AGI $103,000 - $123,000 AGI3
Not an active plan participant No limitations apply $193,000 - $203,000 AGI4
Contributory Roth IRAs $122,000 - $137,000 AGI $193,000 - $203,000 AGI

1. The credit is reduced by $50 for each $1,000, or fraction thereof, of AGI above the threshold.

2. AGI is adjusted gross income. Different modifications may apply depending on the specific provisions.

3. Applies when both spouses are active plan participants or only the participant spouse contributes.

4. Applies if at least one spouse is not an active participant.

"I" bonds offer inflation protection. The interest paid on the bonds has two components: a fixed rate and a twice-yearly inflation adjustment based on the consumer price index. Like regular savings bonds, the interest income can be deferred until redemption.

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If you've been holding onto a U.S. savings bond for a long time, take note…Series E bonds issued in or after December 1965 only earn interest for 30 years. Bonds issued earlier pay interest for 40 years. This means that your bonds may no longer be paying interest! Check the issue date of your U.S. savings bonds. If you're holding any noninterest bearing bonds, cash them in now!