Books, room, and board are not considered qualified education expenses.
If you redeem electronic bonds in your TreasuryDirect account, your 1099-INT will be available through your account.
You can see the interest on your IRS Form 1099-INT.Once you start to report the interest every year (for example, for a child in the child's Social Security Number you must continue to do so every year after that.You must pay the education costs in the same year you redeem the bonds, and only certain costs are covered: tuition, fees, some books and some equipment, such as a computer that might be required for a certain course.According to the United States Treasury, "If the amount of eligible bonds you've cashed during the year exceeds the amount of qualified educational expenses paid during the year, the amount of excludable interest is reduced pro rata." An Alternative Method for Using Series EE Savings.Situation, who owes the tax.So, if Jill owned a bond from 2003 to 2007 before relinquishing it to Amy, who has owned it since, Jill must pay the taxes on the interest accrued between 20, and Amy must pay the taxes on interest earned after 2007.Married couples must file jointly to be eligible for the exclusion.".For instance, if Jim and Bill purchase a 1,000 bond with Jim paying 400 and Bill paying 600, Jim is responsible for 40 of the taxes, and Bill is responsible for 60 naughty adult jokes of the taxes.If one person purchases the bond and is the sole owner for the life of the bond, that person owes the taxes on the interest.The Roth IRA must be a self-directed IRA and under the control of a custodian or trustee.You must incur the education expenses for tax purposes in the same year that you redeem the bonds.For 2012, the limits on modified adjusted gross income kicked in at 72,850 for single filers and 109,250 for couples.That means that you don't actually get checks in the mail for the interest you are owed like you would with a corporate bond or municipal bond.You give up ownership of the bond and the bond is reissued.These bonds come in two types.If you are reporting the interest on bonds another person owns (for example, the interest on your child's bonds you report that on the other person's federal income tax return with other interest income that person has earned.
Youll dodge state and local taxes on the interest your bonds earn, which might make them seem like a more attractive investment vehicle for taxpayers who live in states with high income tax rates.
The Modified Adjusted Gross Income Rule.