Sat. Jan 28th, 2023

Educational Saving Bonds (ESBs) are not like the other bonds; they are investment security notes offered only by the United States Treasury Department to specific banks and credit unions. Considered to be one of the safest ways of investing in the United States, ESBs provide investors with the opportunity to support government-funded projects. Depending on the security paper’s denomination, the government pays back interest to the investor at set interest rates. Just like other common bonds, educational saving bonds are transferable; they can be bought and sold at the bond exchange market. Accumulated interests are usually issued after a certain time (usually after six months).

It is a common rule in the U.S. that all saving bonds should be taxed on interests that they have accumulated. However, there is an exception when it comes to educational saving bonds. With ESBs, tax deduction on bond interest accumulation is not done. A bond holder can claim part or full exclusion on the amount gained from such programs, but certain requirements must be met in order for this to happen.

· The bond must be categorized under the series EE/E, or Series I bonds, that begun in 1990.

· Age is a factor to consider when purchasing this bond. An investor qualifies for an ESB when he/she is above 24 years at the time of purchase. The Federal law pertaining to these kinds of bonds is strict, and a potential owner must be at least 24 years before the issue date of the bond. Information regarding the bond’s issue date is found on the front part of the security note.

· When an individual decides to buy an educational saving bond, the name appearing on the note must exclusively be his/hers. No one can buy an ESB on behalf of another person, unless in instances of partnership. In a partnership scenario, both partners’ names must appear on the filing form.

· Educational saving bonds must be used for educational purposes only; either for personal education or funding a child’s education. If the funds are for child education, the child is listed as a beneficially and not as a co-owner. Married couples should file joint returns in order for them to qualify for tax interest exclusion.

· An important thing to note is that the maximum allowable modified adjusted gross income (MAGI) is$85,100 for a single person and $135,000 for joint partners.

Educational saving bonds are a great way of saving for higher education. With a small starting amount of about $25, one can have a solid backup for children’s education using these services.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. [] / Tel:888.321.6188

By rahul