The education savings bond tax exclusion lets you leave the interest on qualifying Series EE or Series I bonds out of your federal taxable income when you use the redemption proceeds for higher education. The rule lives in Internal Revenue Code Section 135. To use it you have to own eligible bonds, spend the money on qualified expenses in the same year you cash them, and fall under an income ceiling that for 2026 caps at $116,800 of modified adjusted gross income for most filers and $182,650 for joint filers.
Which Bonds Qualify
Only Series EE and Series I savings bonds are eligible, and only if they were issued after December 31, 1989. Older bonds do not qualify regardless of type. The bond must have been purchased at a discount, which is the standard way both EE and I bonds are sold through TreasuryDirect.
Two ownership rules cause most of the disqualifications. The bond owner must have been at least 24 years old before the bond’s issue date. A bond bought by a 23-year-old will never qualify, even after that person turns 24. And the bond must be registered in the taxpayer’s name, or jointly in the names of the taxpayer and spouse. A bond a parent bought but titled in a child’s name does not qualify for the exclusion for either of them.
Who Can Claim It
The exclusion belongs to the bond owner. Co-owning spouses can claim it on a joint return. A grandparent who bought a bond in a grandchild’s name cannot claim it, and neither can the grandchild, because the age and ownership tests failed at issuance.
Filing status matters. If you file as married filing separately, you are barred from the exclusion entirely. Every other status works: single, head of household, qualifying surviving spouse, and married filing jointly. Married couples who want the benefit must file jointly.
What Counts as a Qualified Education Expense
Qualified expenses are tuition and fees required for enrollment at an eligible institution, paid for you, your spouse, or your dependent. Room and board, books, and supplies do not count. Courses in sports, games, or hobbies are out unless they are part of a degree program.
An eligible institution is one that participates in federal student aid under Title IV of the Higher Education Act. Most accredited colleges, universities, community colleges, and vocational or trade schools are covered. If the school has a Federal School Code for financial aid, it almost certainly qualifies. Section 135 does not distinguish between undergraduate and graduate study, so tuition at a graduate or professional program counts if the institution itself is eligible.
Contributions to a 529 qualified tuition program or a Coverdell education savings account also count as qualified expenses. You can redeem a bond and roll the proceeds into a 529 or Coverdell in the same tax year, and the contribution satisfies the requirement. On Form 8815 you enter “QTP” or “Coverdell ESA” along with the plan’s name and address instead of a school.
Before you run the numbers, reduce your qualified expenses by any tax-free educational assistance received during the year. That includes tax-free scholarships and fellowships, veterans’ education benefits, employer-provided tuition assistance, and distributions from a 529 plan. Subtract any expenses used to claim the American Opportunity Tax Credit or the Lifetime Learning Credit as well. The same dollar of tuition cannot support two tax benefits.
Income Limits for 2026
The exclusion phases out as modified adjusted gross income rises. For 2026:
- Single, head of household, or qualifying surviving spouse: the phase-out begins at $101,800 and ends at $116,800. Above $116,800, no exclusion is available.
- Married filing jointly: the phase-out begins at $152,650 and ends at $182,650. Above $182,650, no exclusion is available.
Within the phase-out range you lose the exclusion proportionally. MAGI at the midpoint of the range wipes out roughly half the benefit. The IRS adjusts the thresholds each year for inflation. For 2025, the ranges were $99,500 to $114,500 for single filers and $149,250 to $179,250 for joint filers.
How the Exclusion Is Calculated
If your qualified education expenses equal or exceed the total bond proceeds (principal plus interest), you can exclude all of the interest. If expenses fall short, you exclude only a fraction. Divide qualified expenses by total proceeds, then multiply that ratio by the interest earned.
Say you redeem bonds worth $10,000 in total proceeds, made up of $5,000 principal and $5,000 interest, and you paid $8,000 in qualified tuition that year. Your ratio is $8,000 divided by $10,000, or 80%. You exclude 80% of the $5,000 interest, which is $4,000. The other $1,000 of interest is taxable.
If your MAGI also lands inside the phase-out range, a second reduction applies on top of the expense-ratio result. The two reductions stack, which can shrink the benefit sharply for higher earners with smaller tuition bills.
Filing the Exclusion
You claim the exclusion on IRS Form 8815. The form asks you to list each institution or 529/Coverdell plan that received qualified payments, total those expenses, then enter the total proceeds and interest from every bond you cashed during the year. The form applies the expense ratio and the MAGI phase-out and produces the excludable amount.
For each redeemed bond you’ll need the serial number, issue date, face value, and total redemption proceeds. Form 8818 is available for tracking redeemed bonds through the year if you want an organized log.
The exclusion amount from Form 8815 flows to Schedule B of Form 1040. The interest is reported as income on Schedule B and then subtracted, so the excluded portion never reaches your taxable income. Electronic filing software attaches Form 8815 automatically; paper filers attach it to the return.
Records to Keep
Hold on to two sets of documents. First, proof of qualified expenses: tuition bills, receipts, canceled checks, or account statements showing payments to the school or contributions to a 529 or Coverdell account. Second, a written record of each redeemed bond, with its serial number, issue date, face value, and total redemption proceeds.
The IRS generally expects you to keep records supporting your return for three years from the filing date. If you understated income by more than 25% of what your return showed, that window stretches to six years. Keeping bond and tuition records for at least six years gives you a comfortable margin if an audit arrives late.