Savings bonds for education: the tax-free interest rule
Interest on EE and I bonds can escape federal tax when the bonds are cashed to pay college tuition in the same year. The calculator applies Form 8815 to your amounts and to the 2026 income limits.
Interest you can exclude in 2026
$2,550.00
Full exclusion: modified AGI below the phase-out.
| Interest × expenses ÷ amount cashed | $2,550.00 |
| Phase-out | $152,650 to $182,650 |
| Interest still taxable | $450.00 |
Only EE bonds issued after 1989 and I bonds, bought by an owner aged 24 or more, count. The Form 8815 worksheet rounds as shown on the form.
Worked out by Radif Partners · How we calculate · rates read on treasurydirect.gov and fiscaldata.treasury.gov · not personal financial advice
The education savings bond program lets you exclude savings bond interest from federal income when you cash qualified bonds and pay qualified higher education expenses in the same year. Qualified bonds are EE bonds issued after 1989 and I bonds, registered to an owner who was at least 24 before the issue date, alone or with a spouse; a bond in a child's name does not qualify. Expenses are tuition and required fees for you, your spouse or a dependent, or contributions to a 529 plan or a Coverdell account, minus scholarships and other tax-free aid. The excluded share is the interest × expenses ÷ amount cashed. In the IRS example, a couple cash $9,000 of bonds, including $3,000 of interest, and pay $7,650 of tuition: $2,550 of interest is tax-free. For 2026 the exclusion shrinks when modified AGI goes above $101,800, or $152,650 on a joint return, and disappears at $116,800 and $182,650. Married couples filing separately cannot use it.
The four conditions
TreasuryDirect lists them (TreasuryDirect, using bonds for higher education) and Publication 970, chapter 9, gives the detail (IRS Publication 970). First, the bonds: Series EE issued after 1989 or Series I, owned by you or by you and your spouse, and you were at least 24 before the issue date. Second, the expenses: tuition and required fees at an eligible institution, or contributions to a 529 plan or a Coverdell account, for you, your spouse or a dependent, paid in the year you cash the bonds. Third, income: modified AGI below the limit for the year. Fourth, filing status: any status except married filing separately. You claim the exclusion on Form 8815, attached to your return (IRS Form 8815).
How the excluded amount is figured
If what you receive from the bonds during the year, principal and interest together, is no more than your adjusted qualified expenses, all the interest can be excluded. If it is more, only part is: the interest is multiplied by adjusted expenses ÷ proceeds. In the Publication 970 example, $3,000 × $7,650 ÷ $9,000 = $2,550 tax-free and $450 taxable. The couple's MAGI of $90,000 is below the limit, so no phase-out applies. At their federal rate of 12 %, the exclusion saves about $306.
Your own exclusion
Interest you can exclude in 2026
$6,090.00
| Interest × expenses ÷ amount cashed | $6,090.00 |
| Phase-out | $152,650 to $182,650 |
| Interest still taxable | $2,310.00 |
The income limit for 2026
The exclusion is reduced in proportion as modified AGI moves through the phase-out range, and lost above it. For 2026 the range is $101,800 to $116,800 for single filers and heads of household, and $152,650 to $182,650 on a joint return, against $99,500 to $114,500 and $149,250 to $179,250 for 2025. The table runs the Publication 970 case through the 2026 joint range.
| Modified AGI (joint) | Reduction | Interest excluded | Interest taxed |
|---|---|---|---|
| $142,650 | 0.0 % | $2,550.00 | $450.00 |
| $152,650 | 0.0 % | $2,550.00 | $450.00 |
| $167,650 | 50.0 % | $1,275.00 | $1,725.00 |
| $177,650 | 83.3 % | $425.85 | $2,574.15 |
| $182,650 | 100.0 % | $0.00 | $3,000.00 |
Modified AGI here is your adjusted gross income before the exclusion, with a few items added back: foreign earned income and housing exclusions, the exclusions for residents of American Samoa and Puerto Rico, employer adoption benefits and the student loan interest deduction. The bond interest itself is included, so cashing a large amount can push MAGI into the phase-out. The worksheet in the Form 8815 instructions computes it.
What reduces the expenses
Qualified expenses are reduced by the tax-free part of scholarships and grants, including Pell grants, by expenses used for tax-free 529 or Coverdell withdrawals, by veterans' education benefits, tuition reductions and employer-provided education aid, and by any expense used to claim the American opportunity or lifetime learning credit. Gifts and inheritances do not reduce them. An eligible institution is any college, university, vocational school or other postsecondary school that can take part in the Department of Education's student aid programs, which includes nearly all accredited ones and some schools abroad; the school can confirm it. The same dollar of tuition cannot be used twice: a family claiming the American opportunity credit on part of the tuition can use only the rest for the bond exclusion.
Planning the bonds
A $5,000 electronic EE bond bought in January 2012 by a parent is worth $5,472.00 on the first of October 2026, with $472.00 of interest. That interest is the part that can become tax-free. The exclusion applies only to interest not yet taxed, which is why Publication 550 points owners planning it toward method 1, reporting in the year the bond is cashed: an owner who reports savings bond interest every year has little left to exclude. The bonds also have to be cashed in a year when expenses are paid and income is under the limit, which may not be the year the bonds would otherwise be cashed. The EE doubling page shows when an EE bond reaches twice its price, and the tax page explains the two reporting methods.
State tax
The exclusion is a federal one. Savings bond interest is exempt from state and local income tax in any case (31 U.S.C. 3124), whether or not it pays for college, so the program changes nothing on the state return. For other ways of cashing the bonds, see the cashing page.