Can I move treasury savings bonds into a 529 without a tax hit?

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720pete
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Location: USA

Can I move treasury savings bonds into a 529 without a tax hit?

Post by 720pete »

When I was born I had a family member purchase some treasury savings bonds for me. They are still accruing interest to this day and I have not cashed them yet. I would like to open a 529 for my child. Is there any way I can transfer this savings bond or the proceeds from the bond sale into a 529 account without taking some kind of tax hit? If I cash in the bonds then I would need to recognize the interest as income on my personal income tax return, correct? But if this bond was in a 529 and I used it for education expenses it would not count as income?
Last edited by 720pete on Fri May 13, 2022 11:59 am, edited 1 time in total.
fabdog
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Location: Williamsburg VA

Re: Can I move a savings bond into 529 without a tax hit?

Post by fabdog »

Here's an article that talks about rolling savings bonds into a 529. It's the second part of the article.

https://www.savingforcollege.com/articl ... a-529-plan

Unfortunately I don't think these bonds will qualify as weren't purchased after you were age 24. But if there is a workaround I am sure someone will chime in. You can't move the savings bonds directly into the 529, savings bonds can only be held on paper or at Treasury Direct.

Mike
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langelgjm
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Re: Can I move a savings bond into 529 without a tax hit?

Post by langelgjm »

From TD's page on the education tax exclusion:
You can take the exclusion if all five of the following apply:
  • You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
  • You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents. [This can include a 529 contribution.]
  • Your filing status is any status except married filing separately.
  • Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
  • You were 24 or older before your savings bonds were issued. [This is the requirement you won't meet]
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