Short Answer
Under IRC §135 you can exclude interest on Series EE bonds issued after 1989 and Series I bonds from income when you cash them in a year you pay qualified higher education expenses. The bond must be owned by someone who was at least 24 when it was issued, so a bond in a child's name never qualifies. If your bond proceeds exceed your net qualified expenses, only the fraction (net expenses ÷ total proceeds) of the interest is excludable. The exclusion then phases out over modified adjusted gross income: for 2026, from $152,650 to $182,650 for married filing jointly and $101,800 to $116,800 for single, head of household, or qualifying surviving spouse. You figure it on Form 8815 and carry the excludable interest to Schedule B, and married couples must file jointly.
2026 and 2025 Savings Bond Exclusion Phase-Out Figures
Education Savings Bond Interest Exclusion — IRC §135 MAGI Phase-Out
| Figure | Tax Year 2026 | Tax Year 2025 |
|---|
| Phase-out begins (single, HOH, QSS) | $101,800 | $99,500 |
| Phase-out complete (single, HOH, QSS) | $116,800 | $114,500 |
| Phase-out begins (married filing jointly) | $152,650 | $149,250 |
| Phase-out complete (married filing jointly) | $182,650 | $179,250 |
| Phase-out range (single, HOH, QSS) | $15,000 | $15,000 |
| Phase-out range (married filing jointly) | $30,000 | $30,000 |
| Married filing separately | Not eligible | Not eligible |
Only the starting threshold is indexed for inflation each year under §135(b)(2)(B); the phase-out range stays fixed at $15,000 (single, head of household, or qualifying surviving spouse) and $30,000 (married filing jointly). Within the range the excludable interest is reduced ratably by the fraction of MAGI over the lower threshold to the range width. Source: Rev. Proc. 2025-32 §4.17 (2026) and Rev. Proc. 2024-40 (2025).
How the Savings Bond Exclusion Calculation Works
This tool follows the order of IRS Form 8815. For the full rules - which bonds qualify, the ownership trap, qualified expenses, and coordination with 529 plans and education credits - see the Savings Bond Education Exclusion Guide.
Step 1: Net Your Qualified Expenses Confirmed
Form 8815 lines 2 to 4. Start with tuition and required fees (and any 529 or Coverdell contributions), then subtract tax-free scholarships, veterans' and employer education assistance, expenses used to claim an education credit, and amounts covered by tax-free 529 or Coverdell distributions. If the result is zero or less, no interest can be excluded.
Step 2: Apply the Applicable Fraction Confirmed
Form 8815 lines 5 to 8. If your net qualified expenses are at least as large as your total bond proceeds, the fraction is 1.000 and all the interest is potentially excludable. If proceeds exceed expenses, the fraction is net expenses divided by total proceeds, and only that share of the interest moves forward under §135(b)(1).
Step 3: Apply the MAGI Phase-Out Confirmed
Form 8815 lines 9 to 13. Under §135(b)(2), if your modified adjusted gross income exceeds the year's lower threshold, the tentative exclusion is reduced by the fraction equal to the excess over the range ($30,000 joint, $15,000 otherwise). At or above the upper threshold the exclusion is fully phased out.
Step 4: Determine Excludable and Taxable Interest Confirmed
Form 8815 line 14. The excludable interest is the tentative amount after the phase-out reduction. The remaining interest - the part lost to the proration and the part lost to the phase-out - is taxable and reported with your other interest income.
Step 5: Report on Form 8815 and Schedule B Confirmed
You figure the exclusion on Form 8815 and carry the excludable interest to Schedule B (Form 1040), line 3, where it reduces the interest you report. Keep the bond records and tuition records in case the IRS asks you to substantiate both.
Frequently Asked Questions
What is the savings bond education interest exclusion?
Under IRC §135, you can exclude from income some or all of the interest on Series EE bonds issued after 1989 and Series I bonds that you cash in a year you pay qualified higher education expenses for yourself, your spouse, or a dependent. If your total bond proceeds exceed your net qualified expenses, only a proportional share of the interest is excludable, and the exclusion phases out at higher modified adjusted gross income. You figure the amount on Form 8815 and report excludable interest on Schedule B.
Which savings bonds qualify for the education exclusion?
Only Series EE bonds issued after 1989 and Series I bonds qualify. The bond must be issued in your name (or, if married, in your name and your spouse's name), and you must have been age 24 or older before the bond was issued. A bond bought by a parent and issued in a child's name does not qualify for the exclusion by the parent or the child. The child can be the beneficiary of the education spending but cannot be the bond owner.
What are the income limits for the savings bond exclusion in 2026 and 2025?
The exclusion phases out over modified adjusted gross income. For 2026 it phases out from $152,650 to $182,650 for married filing jointly and from $101,800 to $116,800 for single, head of household, or qualifying surviving spouse. For 2025 the ranges are $149,250 to $179,250 (joint) and $99,500 to $114,500 (other). The phase-out range is a fixed $30,000 for joint filers and $15,000 for everyone else; only the starting threshold is indexed for inflation each year. Above the top of the range no interest can be excluded.
What education expenses count for the savings bond exclusion?
Qualified higher education expenses are tuition and required fees at an eligible postsecondary institution for you, your spouse, or a dependent. Room and board, books, and courses involving sports, games, or hobbies that are not part of a degree program do not count. Contributions to a 529 plan or a Coverdell education savings account also count as qualified expenses. You must reduce qualified expenses by tax-free scholarships, veterans' education benefits, employer educational assistance, expenses used to claim an education credit, and amounts covered by tax-free 529 or Coverdell distributions.
What if my child owns the savings bond?
Then the interest cannot be excluded under §135. The exclusion requires the bond owner to have been at least 24 years old before the bond was issued, so a bond issued in a minor child's name never qualifies, and a bond a parent buys in the child's name does not qualify for the parent either. To use the exclusion for a child's college, the parent must own the bond and claim the child as a dependent. This is the single most common reason a claimed exclusion is denied.
What happens if I cash more bond proceeds than my tuition?
Only a proportional share of the interest is excludable. The applicable fraction equals your net qualified expenses divided by the total proceeds (principal plus interest) you cashed. For example, if you cashed $20,000 of bonds containing $8,000 of interest but had only $10,000 of net qualified expenses, the fraction is 0.50, so just $4,000 of the interest is potentially excludable before any income phase-out. Cashing only the amount you need for tuition avoids wasting the exclusion on unused proceeds.
Can married filing separately use the savings bond exclusion?
No. IRC §135(d)(3) and Form 8815 both require any married taxpayer to file a joint return to claim the exclusion. There is no living-apart exception for §135, unlike some other family tax benefits. If you are married and file separately, none of the savings bond interest can be excluded, regardless of income or expenses.
How do I claim the savings bond education exclusion?
You figure the exclusion on Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989, and carry the excludable amount to Schedule B (Form 1040), line 3, where it reduces the interest you report. Keep records of the bonds (serial numbers, issue dates, redemption dates and amounts) and of the tuition you paid, because the IRS can ask you to substantiate both the qualifying bonds and the expenses.
Did the One Big Beautiful Bill Act change the savings bond exclusion?
No. The One Big Beautiful Bill Act (P.L. 119-21) did not amend IRC §135. The last change to the section was in 2021, when the American Rescue Plan Act adjusted the modified adjusted gross income definition. The structure of the exclusion, the qualifying bonds, the age-24 ownership rule, and the phase-out mechanics are unchanged; only the inflation-indexed starting thresholds move each year.
What to Do Next
If Your Income Is Below the Phase-Out
Cash only as many bonds as you need to match your net qualified expenses, so the applicable fraction stays at 1.000 and all the interest is excludable. File Form 8815 and carry the result to Schedule B. If you also have a 529 plan, read how the two coordinate in the Savings Bond Education Exclusion Guide.
If You Are Near the MAGI Threshold
Because the phase-out runs over a fixed $30,000 (joint) or $15,000 (other) of MAGI, lowering MAGI with a pre-tax retirement contribution can restore part of the exclusion. Estimate the effect with the AGI & MAGI Calculator and read how MAGI is built in the MAGI Guide.
If You Hold More Bonds Than You Need This Year
Consider rolling the excess proceeds into a 529 plan, since a contribution to a 529 counts as a qualified expense under §135, letting you exclude the interest now and spend the 529 later. Compare the 529 tax treatment with the 529 Plan Tax Calculator.
If You Also Qualify for an Education Credit
The American Opportunity or Lifetime Learning Credit is usually worth more per dollar than the bond exclusion, so claim it first on the tuition it needs, then apply the savings bond exclusion to the remaining expenses. Model the credit with the Education Tax Credit Calculator.