Back to School: Education Savings Bonds

Okay, you already know how savings bonds work… They're backed by the federal government so the principal is guaranteed. When you buy them, federal savings bonds earn interest which is free from state and local income taxes. Federal income tax on the bonds is generally deferred until you cash the bonds in or until they mature. There are exceptions to the tax deferral rule and one happens to come in handy when you have educational bills to pay. When you cash in educational bonds in order to pay education expenses, you may be able to exclude the interest for federal income tax purposes. The bonds that qualify for the exclusion are those in the series EE issued after 1989 or a series I bond. The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners) and the owner must be at least 24 years old before the bond's issue date (you'll find the issue date printed on the front of the savings bond). Of course, as with anything tax, you have to meet some criteria: The qualified education expenses must be for yourself, your spouse or a dependent for whom you claim an exemption on your return. Qualified education expenses generally include tuition and fees required to enroll at or attend an eligible educational institution. Your modified adjusted gross income (MAGI) must be less than $85,100 ($135,100 if married filing jointly or qualifying widow(er)). You cannot file as married filing separately. If your qualified education expenses are more than the interest on the bonds, then all of the interest should be tax free to you (assuming, of course, that you otherwise qualify). If the interest is more than your expenses, you'll have to figure the exclusion by pro-rating the interest. You report the exclusion on a federal form 8815 (downloads as a pdf) and then again on line 3 of Schedule B, Interest and Ordinary Dividends. Your tax professional ought to be able to help you sort it all out. Educational savings bonds can be a great way to save for college since you can start with relatively small dollars (as low as $25) and not have to worry about the tax consequences. And you can start when the kids are young… which brings us to our giveaway. And it's not just any giveaway: it's our biggest giveaway of the series. We have TEN cool kid-related prizes up for grabs. That's right, TEN. First, we have a giveaway from Snapily, the only online provider enabling consumers to transform their ordinary digital pictures into customizable 3D and/or flip animated one-of-a-kind photos. Snapily offers special products that parents and children can customize with their favorite photo memories, including notebooks, bookmarks, rulers and backpack tags. Snapily is offering a gift code that you can use to upload your own pics and customize your favorite items. To help protecting children from the dangers of being online, we're giving away an Internet Security Suite Plus from Total Defense. Featuring anti-virus, anti-spyware, personal firewall, anti-spam, parental controls, anti-phishing, migration, continuous updates, informative reports and access to a 24/7 help desk, Internet Security Suite Plus is a great first line of defense in protecting children online. One reader will receive a one year subscription of the Total Defense Internet Security Suite Plus with three licenses, so the internet security software can be uploaded onto three PCs. Next, we're giving away an AUTOSEAL® Kids Trekker Mug (14 fl. oz.) featuring AUTOSEAL® technology – automatically seals between sips. It's BPA Free – made with polypropylene (PP) #5 and it has an easy-grip shape for little hands to hold. We're also giving away an AUTOSEAL® Kangaroo Water Bottle with Storage Compartment (24 fl. oz.) featuring an AUTOSEAL® lid which is 100 percent spill-proof. It has one-handed water bottle operation for on-the-go drinking and a storage compartment – perfectly convenient for carrying a locker key or school ID's within the water bottle. Also for the giveaway: an oral care giveaway package with REACH and REMBRANDT which includes a REMBRANDT® 2 Hr Whitening Kit, REMBRANDT® Deeply White™ paste & rinse, REMBRANDT® INTENSE STAIN™ toothpaste, REMBRANDT® Whitening Strips, 2 REACH® by Design™ toothbrushes and a Total Care + Whitening™ tooth brush and floss. We also have a prize pack of Malt-O-Meal cereal. Malt-O-Meal has a NEW Blueberry Mini Spooners variety which is full of whole grain, made with 11 vitamins and minerals, has 0 grams of trans fat, and are the perfect snack that's both nutritious and delicious. Malt-O-Meal is also working to show consumers that there is a better, smarter way to buy their cereal. The company has a new Bag The Box initiative meant to show consumers that they not only can save money, but they can also feel good about buying more sustainable packaging by rethinking the box and buying cereal in a bag. Multi-tasking teens glued to the phone at home can chat away and never miss a call, even if a call comes in on their cell, with the new V-Tech DS6421-3 -3 DECT 6.0 digital Connect-to-Cell phone system. This three-handset system comes with all the modern bells and whistles, like push-to-talk intercom, digital answering system, base and handset speakerphones, caller ID and capability to download your directory from your cell, with the bonus that it can make and receive landline or cellular calls – both with the range and quality of a landline, ideal for households with spotty cell reception or without landline service. We're also giving away a box of Nonni's Biscotti, a delicious biscotti that comes in varies chocolate flavors. This month, they launched their new mini- version of biscotti, "Biscotti Bites!" This is a perfect snack for anyone at school or on-the-run and the best part, it only contains 40 calories a bite. Finally, we're giving away a Brita Bottle and a Brita Pitcher (two separate giveaway prizes). Both products are featured in fun colors, encouraging younger children to enjoy drinking water and providing college students with a great accent to their dorm room. For eco-conscious students, Brita filtered products are also a great way to save money and reduce waste that would otherwise result purchasing bottle water. The Brita Bottle is a new reusable bottle, with a built-in-filter, provides great-tasting water anywhere, anytime. Whether heading off to college or starting elementary school, the Brita Bottle keeps students hydrated while on-the-go. The Brita Grand pitcher, the largest capacity, is perfect for sharing water between roommates or visitors. Keeping a full Brita pitcher in college dorm rooms makes hydration convenient and easy, leaving students more time to focus on the latest essay or project. It's easy to enter. Just post a comment below to tell me your biggest back to school challenge. It can be anything. Well, almost anything: keep it clean, people. I'll choose one winner randomly (using a number generator) for each prize out of all of the qualifying entries. Here are some more rules because, as you know, I'm a lawyer and I like rules: Entries must be posted in the comments section for this blog post in the space below by 10:59 p.m. EST on September 26, 2011. Don't panic if your comment doesn't show immediately. If it goes to moderation because, for example, you're new here, the time stamp on your comment is what counts. If you have difficulty registering, please send an email to and copy me ( so that I can help if I need to/can. I love my Twitter followers and my Facebook fans but for this particular giveaway, tweets and Facebook comments will not be counted. Ditto for emails. You must leave your comment on the blog at this post. You can enter as many times as you like but you must leave a different answer each time you comment. Offensive comments or comments that otherwise violate the comment policy will be deleted and will not be considered valid for purposes of the contest. Pingbacks and other links will be disregarded for purposes of the contest. You must include your full name and your email address with your entry, just enter it when you register to comment. I won't publish your email address but I do need contact information for the winning entry. Due to shipping considerations, only United States addresses, please. Sorry, Canada, eh? I respect your privacy and I will not send you anything unrelated to your entry in this contest. By entering the contest, you agree that I may post any part or all of your submission including your name as a part of the contest announcements or promotions, with the exception of your email address. Finally, the giveaway is about me, me, me. It's not affiliated with or endorsed by Forbes. So leave them out of it, okay? Comment away!

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