<p>Does the money receive from a matured saving bond subject to federal/state tax?</p>
<p>How about the impact on EFC at maturity?</p>
<p>Savings bonds (EE/I) are exempt from state income tax, but not federal. However, the feds do allow for an educational exclusion for those that qualify:</p>
<p><a href="http://www.publicdebt.treas.gov/sav/sav.htm%5B/url%5D">http://www.publicdebt.treas.gov/sav/sav.htm</a></p>
<p>"What is the Education Tax Exclusion?
The savings bond education tax exclusion permits qualified taxpayers to exclude from their gross income all or a portion of the interest earned on the redemption of eligible Series EE and I Bonds issued after 1989 in the name of a taxpayer age 24 or older at the date of issuance. To qualify for this exclusion, tuition and other educational expenses must be incurred by the taxpayer, the taxpayer's spouse, or the taxpayer's dependent at certain post-secondary educational institutions. Persons with incomes above certain thresholds may not be eligible to participate. The education tax exclusion is described in 26 U.S.C. 135"</p>
<p>Dunno impact on efc...</p>
<p>Asset of the elder as savings. However, there can be some argument that the Bond is for retirement. Bonds reach "maturity" when they reach face value or at 40 years, where they no longer accrue interest.</p>
<p>DD had a small number of EE bonds which were purchased for her when she was a baby by her Grandmother. (We listed these as DDs assets on the FAFSA and Profile) They were not tax free even when used for educational purposes because they were not purchased by us to use for our dependents/selves. She cashed them this year, and only incurred 90$ of taxes because she only earned a few thousand dollars this year. Not too bad; I had assumed that she would end up paying a third of the interest in taxes.</p>
<p>The impact on the EFC is determined by whose SSN is attached to the bonds. When interest is declared, who will get the 1099?</p>
<p>If they are owned by the parent, you will be assessed 5.65% of accrued value of the bond, rarely the face value.</p>
<p>If they are owned by the student, you will be assessed 35% of the accrued value of the bond.</p>
<p>Interest is only assessed when the bond is cashed in or on an annual basis if you chose to pay taxes in that fashion (most people don't). When interest is taken, you will have to include that in the income portion of the EFC calculation (based again upon who owns the bond).</p>
<p>In a nutshell... bonds in parent's name -- so so... bond in student's name -- always bad.</p>
<p>Strange rules for tax exemption. The savings bond has to be owned by the parent and not the student. And a 23 yr old parent or 22, or 21 yr old parent who buys a savings bond for his kid does not get the tax exemption. They must be 24 when they purchase the bond. That is whacked!</p>
<p>My son also has a few savings bond that were given him when he was a baby. What is the procedure for cashing them in?</p>
<p>Take them to a bank.</p>
<p>We actually have a bond here that was given as a gift by a friend and the SS # on it is HERS. Who does that one belong to???</p>
<p>I can't say that I've encountered a friends SSN on a bond before. My first impression is that it technically belongs to the friend.</p>
<p>My concern is cashing it in. If I remember correctly, savings bonds are treated similarly to bearer bonds. If you have the paper, you can cash it.</p>
<p>Your bank will be able to clarify this.</p>
<p>When you take the bond to the bank to cash, they'll complete a form that will include the SS# of the one whose asset it is...In our case, we had savings bond with my uncle's SS# on them even though he had given them to my son. At the bank, my son's SS# was put on the form and he received the 1099 later on showing the interest earned.</p>
<p>All of the above relate to federal savings bonds. If original poster is asking about state bonds issued under state plans, it will depend on the plan, Here in Illinois they sold college savings bonds for years that are tax free, state and federal.</p>
<p>We made sure to cash our EE Bonds BEFORE January of S's junior year.</p>
<p>My kids have a bunch of these thanks to their step-grandmother participating in a program at her workplace which kicked out a bond every few months. I just looked through them and the only consistent thing was the rotation of their names. Over half of them have her SSN, some have the kids SSN and all of them have POD to my name. I take it as long as our names are on it, we can cash these in? I take it it's better to cash them out before FAFSA time if they're counted against the kids assets as they're in their names? She's been generously doing this since they were babies, it's not a huge amount of money by any means, but it would seem to make sense to shift these to my name.</p>
<p>Check the dates on the bonds. If they were purchased prior to 1989, you'll want to cash them in before January of the junior year of HS (your base year). After 1989, interest on EE bonds is tax-free if used for tuition so it probably wouldn't matter.</p>
<p>what we are doing with the EE bonds is to wait and cash them to pay the loans
D graduates this year !!!
and so may be doing an internship or whatever summer while she looks for a job.( not interested in biotech- wants to do biology she can see- no more school for a while- wish her luck)
Since they are in her name- we figured it was better to wait and use them ( and her education stipend from cityyear) to pay off loans- rather than use them ahead of time to pay tutition ( since her loans are subsidized)</p>
<p>If you hold on to them, and they are in the child's name, how does it affect EFC? Do they calculate the current cash-in value as the child's asset?</p>
<p>they do affect her EFC-but they actually aren't fora very large amount- so not very much
however if the parents bought them- they can have them in their name for less impact</p>
<p>You do have to declare them on the FAFSA and Profile as assets in the name of whoever owns them. In our case, they were "POD" (payable on death) to my mother, but DD's name was on the owner line. She ended up with very little tax liability when she cashed them, since she has limited income as a student. Yes, they are considered assets in the child's name, but they ARE her assets. Morally, if they belong to her, then they should be assessed at the student rate. IMHO it is immoral to try to hide this income by cashing them out and stashing the money in a parent's account. After all, they were purchased by grandma to help pay for college - and that's what they are doing! (Thanks Mom!)
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After 1989, interest on EE bonds is tax-free if used for tuition so it probably wouldn't matter.
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My DD bonds were issued after 1989, but interest is not taxfree for educational purposes because they were purchased by grandparent instead of parent. Silly law, but that's the way it is!</p>
<p>Remember that there are income limits for tax free redemptions of EE and I government bonds. Phase out starts at $91,850 for MFJ and $61,200 for S or HOH.</p>