Why That Savings Bond Interest May Not Be Excludable After All
Cashing in savings bonds to pay for college can have unexpected tax consequences.
Thinking of cashing in those savings bonds junior received from his grandparents to pay for college? Don't assume you can exclude that interest from your taxable income. The rules are very strict, and it is actually hard to qualify that interest as excludable.
There are four requirements that must be met before the interest can be considered potentially excludable: