Minimizing taxes on EE Savings Bonds

Hi,
I have several EE US Savings Bonds created in 1989 and 1991 in my name. They either are already, or will all fully mature by mid-2021. My kids are currently in college. Ideally, I wanted to use this:
Form 8815
formatting link
cash in the bonds as tax-free for higher education expenses for my kids. Our married-filing-jointly AGI is within the limit. HOWEVER, I was 20 years old in 1991, and the IRS form rules say I was supposed to be minimum of 24 at the time of creating the bonds to be eligible for this tax savings.
Is there ANY other method to minimize federal taxes on these bonds?
Thanks,
Anthony
Reply to
anthonymmfalcone
In article snipped-for-privacy@googlegroups.com,
You can bequeath them to a charity in your will, but that's probably not what you had in mind, and it would not be great financial planning since they would likely sit there not earning interest for several decades first.
I'd just pay the tax. At least they're not subject to state income tax.
Reply to
John Levine
I know that one can roll them into a 529 account tax-free, but am not sure if your age would come into play there, too. Then you could just use the 529 to pay for your kids tuition tax-free.
Reply to
Maria Ku
Contributions to a QTP (529) must be in cash or cash equivalent (check, money order). One can not contribute savings bonds. The only rollovers allowed are those that come from another QTP or go from a QTP to an ABLE account.
Reply to
Alan
In article snipped-for-privacy@googlegroups.com,
Nope, same problem, the bonds aren't eligible if issued before you were 24.
See IRS Publication 970, Chapter 10.
Reply to
John Levine
In article <rjdong$uqm$ snipped-for-privacy@dont-email.me,
According to Publication 970, proceeds from savings bonds can usually be contributed to a QTP tax-free:
formatting link
Except not in this case because the rule about buying them when you're at least 24 still applies.
Reply to
John Levine
Of course, one would be contributing the proceeds of the sale of savings bonds, not the bonds themselves. This would normally qualify for income deferral/exclusion.
Maria U. Ku, CPA Oakland, CA
Reply to
Maria Ku
That 24 year old rule is very frustrating as it penalizes me for having even a modest amount of financial foresight in my early 20s (LOL). The only other thing I could think of is adding my (adult) sibling on a co-owner of the bonds in the immediate future, having him cash the bonds and so he receives the 1099INT form in his name, and have him pay the taxes. He's in a much lower tax bracket than me. But, I'm not sure that is even possible.
Reply to
anthonymmfalcone
That's not a rollover. It's a cash contribution. Whether or not one can exclude the interest income on maturity has already been discussed.
Reply to
Alan
Anthony,
If you add your sibling to the title, make sure the current value of bonds transferred does not exceed the $15k annual gift exclusion amount. Also, if your brother is going to be cashing out, why don't he contribute the proceeds to a 529 fbo your-college-student-kid, and so not pay tax on the interest, then pay for your kids tuition from that 529?
Maria U. Ku, CPA Oakland, CA
Reply to
Maria Ku
Unfortunately, you owe income taxes on your current (2019) tax return for the matured 1989 savings bonds, even though you haven't redeemed them.
From IRS Pub 550: Series EE bonds issued in 1989 matured in 2019. If you have used method 1 [deferring taxes until redemption/maturity], you generally must report the interest on these bonds on your 2019 return.
formatting link
From Treasury Direct: You can ... put off (defer) reporting the interest until you file a federal tax return for the year in which the first of these events occurs: * you redeem (cash in) the bond and receive what the bond is worth, including the interest,or ... * the bond stops earning interest because it has reached final maturity
formatting link
Reply to
msf

Site Timeline Threads

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.