Transferring savings bonds to a 529 plan isn’t a single transaction. You redeem the bonds, receive the cash, and then contribute that cash to the 529 yourself. Done correctly, the interest earned on Series EE bonds issued after 1989 and all Series I bonds can be excluded from federal income tax under the Education Savings Bond Program. Miss one of the eligibility rules and the full interest amount becomes taxable.1Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
No Direct Transfer, So Redeem First
Treasury does not offer a rollover or direct transfer from a savings bond into a 529 account. The proceeds have to pass through your bank account before they land in the plan.
For electronic bonds, log into TreasuryDirect, open ManageDirect, and choose “Redeem securities.” The proceeds go to the bank account linked to your profile.2TreasuryDirect. How Do I…? Once the cash arrives, you initiate a contribution to the 529 plan.
Paper bonds are cashed at most banks and credit unions. Bring the bonds and valid identification. The bank deposits the proceeds, and you move the money to the 529 from there.
Which Bonds and Owners Qualify
Only Series EE bonds issued after 1989 and all Series I bonds are eligible. Older paper bonds and other series, including Series HH, do not qualify no matter how the money is spent.3Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
The bond must be registered in your name as sole owner, or in your name and your spouse’s as co-owners. A bond registered in a child’s name doesn’t qualify, even if a parent bought it and even if the child spends every dollar on college. If the child appears as owner or co-owner, the exclusion is off the table for everyone.3Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
You also must have been at least 24 years old before the bond’s issue date. The issue date is printed in the upper-right corner of a paper bond and shown in your TreasuryDirect account for electronic ones.1Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education This is the rule that most often disqualifies bonds bought by grandparents for young grandchildren.
Income Limits for the 2025 Tax Year
Your modified adjusted gross income in the year you redeem determines whether you get the full exclusion, a partial one, or nothing. For 2025:
- Single, head of household, or qualifying surviving spouse: full exclusion below $99,500 MAGI, partial exclusion between $99,500 and $114,500, none at $114,500 or above.
- Married filing jointly: full exclusion below $149,250, partial exclusion between $149,250 and $179,250, none at $179,250 or above.
Married filing separately cannot claim the exclusion at any income level.3Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 The thresholds adjust each year, so check the current Form 8815 instructions before you redeem.4Internal Revenue Service. About Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
One wrinkle: the MAGI calculation adds the bond interest itself back into income. A large redemption in a high-earning year can push you over the limit on its own. Splitting redemptions across two tax years sometimes keeps you inside the phase-out band.
Timing Must Line Up in the Same Tax Year
The 529 contribution has to happen in the same tax year you cash the bonds.5TreasuryDirect. The Program – Using Savings Bonds for Education If you redeem in December and don’t deposit into the 529 until January, the exclusion fails. Year-end redemptions need close attention to processing times at both TreasuryDirect and your 529 plan.
Two holding rules also shape when you can redeem. Savings bonds cannot be cashed at all during the first 12 months after issue. Redeeming before the bond is five years old forfeits the last three months of interest as an early-redemption penalty, so a bond cashed at 18 months pays only 15 months of interest.6TreasuryDirect. EE Bonds
When Your Redemption Exceeds Your Contribution
If the cash you take out of the bonds is larger than what you put into the 529, the exclusion shrinks proportionally rather than disappearing. The excludable interest equals the total interest multiplied by qualified expenses divided by total proceeds.7Internal Revenue Service. Publication 550 (2024), Investment Income and Expenses
Say you redeem $10,000 in bonds, of which $3,000 is interest and $7,000 is principal, and you contribute $8,000 to a 529. Excludable interest is $3,000 × ($8,000 ÷ $10,000), or $2,400. The other $600 of interest is taxable. Matching your redemption to your planned contribution keeps the taxable slice as small as possible.
You also have to reduce qualified expenses by any tax-free scholarships, fellowship grants, employer educational assistance, and Veterans’ educational assistance received during the year.1Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Reporting the Exclusion on Your Return
When you cash the bonds, TreasuryDirect or the bank issues a Form 1099-INT showing the interest as taxable. You claim the exclusion on Form 8815. The form asks for each bond’s serial number, issue date, and face value, plus the name and address of the 529 plan. For a 529 contribution, enter “QTP” on line 1 along with the plan’s name and address.3Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
The excludable amount from Form 8815 carries to Schedule B, line 3, which subtracts it from your taxable interest.8Internal Revenue Service. Instructions for Schedule B (Form 1040) (2025) – Section: Line 3 Skip Form 8815 or forget to carry the number to Schedule B and the IRS treats the full interest as taxable, usually followed by an automated notice.9Internal Revenue Service. Topic No. 403, Interest Received Keep the redemption receipts, 529 deposit confirmations, and a copy of Form 8815 for at least three years after filing.
Stacking with Other Education Tax Benefits
The IRS won’t let you use the same dollar of educational expense to claim more than one tax benefit. Tuition counted toward the American Opportunity Credit or Lifetime Learning Credit can’t also feed the bond interest exclusion, and expenses used to make a 529 distribution tax-free can’t be reused either.1Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Routing bond proceeds through a 529 rather than paying tuition directly separates two transactions in time. The 529 contribution is itself the qualified expense that supports the bond exclusion this year. The tuition payment happens later, when you withdraw from the 529, and that withdrawal can support an education credit in whatever year the tuition is billed. Two benefits, two years, no overlap.
Coverdell education savings accounts and direct tuition payments to an eligible school also count as qualified expenses under the bond program if a 529 isn’t the right fit for your situation.3Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 Room and board never qualify for this exclusion, even though they’re often the biggest line on a college bill.