Any tricks for reporting savings bonds?

However, if your income is very high, your son can file his own tax return. He will not claim himself an exemption, and he'll take a reduced standard deduction of $950. However, if he had a part time job, the standard deduction is increased. I imagine his income will be below $69.950. He can then fill out form 8815 and claim an exemption from the interest. The instructions to form 8815 don't say you cannot file this form if you can be claimed as a dependent on someone else's return -- contrast that to the retirement credit form

Any part of the interest not used for qualified education expenses is taxable. And remember that the kiddie tax on form 8615 applies. It works roughly like this: the first $950 of investment income is tax free because of the standard deduction, the next $950 is taxed at 10%, and the remainder is taxed at the parent's rate. When the child has a part time job, then I think the rules are a little different because the standard deduction will subtract from the wage income, and so more of the investment income will be subject to tax.

Look at the ownership rules at the link I provided. "bonds must be registered in your name and/or your spouse's name"

There's the requirement we don't meet, and that's why I'm wondering about other strategies for minimizing the tax hit.

On 4/3/2010 9:36 AM, JoeSpareBedroom wrote: [snip]

I have to agree with you. The exclusion is not available.

I can't find anything that makes the student a qualified owner. The bonds would have had to been issued to a parent who was at least age 24 and his claiming the student as a dependent. In this instance, they were issued to a grandparent and later inherited.

Considering the way my son does NOT clean the inside of his car, I might try telling the IRS that he's legally blind. I never answered "yes" to that question when Turbotax asked. But there's always a first time.

I'm going to guess that nobody looked into this when it would have been helpful to do so--when the grandparents died. But on the off chance someone did, he may not be liable for tax on the entire amount of interest. See page 9 of Publication 550.

It doesn't take long with software, to do both his and his mother's returns with and without her claiming his dependency exemption. If she claims it she gets the tax credit. If she doesn't claim it he still can't claim his personal exemption, but he gets the credit.

Phil Marti VITA/TCE Volunteer