What this line means
The amount of Series EE or I U.S. savings bond interest you exclude from income because you used the bond proceeds to pay qualified higher education expenses. You calculate this exclusion on Form 8815 and enter the result here. Line 4 subtracts this amount from your total interest on line 1, reducing the taxable interest that carries to Form 1040 line 2b.
Does this apply to you?
- You cashed Series EE or I savings bonds issued after 1989 during the year
- You used the proceeds to pay tuition and fees at an eligible educational institution
- The bonds were issued in your name (or jointly with your spouse) and you were at least 24 years old when the bonds were issued
- Your modified adjusted gross income is below the phase-out limit for the exclusion
Easy to overlook
The exclusion phases out based on your income The exclusion begins to phase out at specific MAGI thresholds that the IRS adjusts annually for inflation. Above the upper limit, the exclusion disappears entirely. Filers who cashed bonds for a child’s college tuition often assume the exclusion is automatic without checking their income against the current year’s phase-out range in the Form 8815 instructions. 1 IRS Form 8815 instructions — Exclusion of Interest From Series EE and I U.S. Savings Bonds
Bonds must be in the parent’s name, not the child’s The exclusion only applies to bonds registered in the taxpayer’s name or jointly with a spouse. Bonds purchased in a child’s name — even if the parent paid for them and the proceeds go toward that child’s tuition — do not qualify. This disqualifies many families who bought bonds as gifts in the child’s name years earlier. 2 IRS Publication 970 — Tax Benefits for Education
Watch out for this
Claiming the exclusion without filing Form 8815. The exclusion is not automatic — you must complete Form 8815 to calculate the excludable amount and attach it to your return. Entering an amount on line 3 without the supporting Form 8815 triggers a processing delay or a notice requesting the missing form.
Footnotes
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IRS Form 8815 Instructions, Exclusion of Interest From Series EE and I U.S. Savings Bonds. https://www.irs.gov/instructions/i8815 ↩
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IRS Publication 970, Tax Benefits for Education, Chapter 10. https://www.irs.gov/pub/irs-pdf/p970.pdf ↩