Using Your Investment For Tax: Free Education
A good financial investment in your child's future is purchasing either Series EE Savings Bonds or Series I Savings Bonds. These bonds can help for higher education costs at an eligible institution. These bonds must have been issued after the year of 1989. With using them for higher education the tax payer does not have to include the interest with their gross income for part or all of the interest earned to qualified people.
You need to be able to qualify for these tax exclusions. The education expenses have to be in the year the bonds are redeemed in. You have to be 24 years old at least when you buy the bonds, if these bonds are used for your child's education and not yours they have to be in yours or your spouses name, and if they are used for your education they must be in your name. You must file a joint return if you are married. There are certain income requirements that you must meet. The institution must qualify for the program. The government requires them seven rules to be met to be able to qualify for the exclusion.
Not all expenses incurred are qualified. The costs of room or books do not qualify as an expense for the tax exclusion. Some of the expenses that qualify are the tuition and fees that are required for your course, expenses for any required course that is a part of certificate-granting or degree program, and sports, hobbies, games if they are part of the certificate program or degree only qualify.
If there was any fellowships, scholarships, or any other kinds of assistance for the education, the amount is reduced by the amount received for these. The interest and the principle have to be used on the qualified education expenses to receive the exclusion. If you cashed in bonds that equal more than the qualified expenses in that year then the excludable interest amount is reduced. This is the reason the bonds should be purchased in small denominations so that you do not fall into this problem.
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