You can effectively move savings bond money into a 529 plan and keep the interest federally tax-free, but there is no direct transfer. Transferring savings bonds to a 529 plan means redeeming qualifying Series EE or Series I bonds, contributing the cash proceeds to the 529 in the same tax year, and claiming the Education Savings Bond Program exclusion on Form 8815. The bonds, the owner, the income level, and the timing all have to line up. Miss one, and the interest is fully taxable.
Which Bonds and Owners Qualify
Only Series EE bonds issued after 1989 and all Series I bonds are eligible. Other series, including Series HH and older EE bonds, do not qualify no matter how the proceeds are spent.1Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
The bond has to be registered in your name as sole owner, or jointly with your spouse. A bond that lists a child as owner or co-owner cannot be used for this exclusion, even if every dollar goes to that child’s college costs.1Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
You also must have been at least 24 years old before the bond’s issue date. The issue date appears in the upper-right corner of a paper bond or in your TreasuryDirect account for electronic bonds.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education This is easy to overlook. Bonds a grandparent bought for a 20-year-old grandchild will never qualify, no matter how long they are held.
Income Limits That Can Wipe Out the Benefit
Your modified adjusted gross income in the year of redemption controls whether you get the full exclusion, a partial one, or none. For 2025:
- Single, head of household, or qualifying surviving spouse: full exclusion below $99,500 MAGI, partial between $99,500 and $114,500, none at $114,500 or above.
- Married filing jointly: full exclusion below $149,250, partial between $149,250 and $179,250, none at $179,250 or above.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Married filing separately is disqualifying at any income.1Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 Couples who file separately for student loan reasons should know this before redeeming. Thresholds adjust annually for inflation, so check the current Form 8815 instructions before you act.3Internal Revenue Service. About Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
One quirk matters when you’re planning a large redemption. The MAGI calculation adds back the bond interest you’re trying to exclude, so a big cash-out can push you into or through the phase-out. Splitting redemptions across two tax years sometimes keeps you eligible.
The Redemption and Contribution Steps
There is no way to move a savings bond directly into a 529 plan. You cash the bond, receive the money, and then deposit it into the 529 yourself.
For electronic bonds, log into TreasuryDirect, open ManageDirect, and choose “Redeem securities.” You can redeem up to 50 bonds in a single transaction, and partial redemptions of a single bond are allowed (minimum $25, with at least $25 left in the bond). Proceeds land in the bank account linked to your TreasuryDirect profile.4TreasuryDirect. How Do I…? From there, transfer the funds to your 529.
Paper bonds can be cashed at most banks and credit unions. Bring the bonds and valid identification. Once the proceeds are in your account, deposit them into the 529 plan.
Two holding-period rules apply to any redemption. A bond cannot be cashed at all during its first 12 months. A bond cashed before it is five years old forfeits the last three months of interest.5TreasuryDirect. EE Bonds
Same Tax Year, No Exceptions
The 529 contribution has to happen in the same tax year as the bond redemption.6TreasuryDirect. The Program – Using Savings Bonds for Education Cash bonds in December, contribute in January, and the exclusion is gone. Near year-end, complete both legs before December 31, or wait and do both in the new year.
Match the Redemption to the Contribution
If you redeem more than you contribute, the exclusion shrinks proportionally rather than disappearing. The excludable interest equals the total interest multiplied by qualified expenses divided by total proceeds (principal plus interest).7Internal Revenue Service. Publication 550 (2024), Investment Income and Expenses
Say you redeem $10,000 in bonds, of which $3,000 is interest and $7,000 is principal, and you put $8,000 into a 529. Excludable interest is $3,000 × ($8,000 ÷ $10,000), or $2,400. The other $600 of interest is taxable. The practical rule: size your redemption to your planned contribution. Extra proceeds mean extra tax.
Reporting It on Your Return
TreasuryDirect or the bank will issue a Form 1099-INT for the full interest. You offset it with Form 8815, which walks through the proceeds, qualified expenses, and the proportional formula. The final excludable amount carries to Schedule B (Form 1040), line 3, and reduces your taxable interest.8Internal Revenue Service. Instructions for Schedule B (Form 1040) (2025) – Section: Line 3
Form 8815 asks for the serial number, issue date, and face value of each bond, plus the name and address of the 529 plan. For a 529 contribution, enter “QTP” on line 1 alongside the plan’s name and address.1Internal Revenue Service. Form 8815 – Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
Keep the redemption receipts, 529 deposit confirmation, and a copy of Form 8815 for at least three years. Skip the form or forget to move the number to Schedule B, and the IRS will treat the full interest as taxable and send an automated notice.9Internal Revenue Service. Topic No. 403, Interest Received
Stacking with Education Credits
You cannot use the same dollar of expense for two tax benefits. Tuition costs used to figure the American Opportunity Credit or Lifetime Learning Credit cannot also count toward the bond exclusion, and expenses used to make a 529 withdrawal tax-free cannot be reused for the bond exclusion either.2Internal Revenue Service. Publication 970 (2025), Tax Benefits for Education
Routing the bond money through a 529 is what makes this manageable. The qualifying expense for the bond exclusion is the 529 contribution itself, not the eventual tuition payment. The tuition comes later, from the 529 withdrawal, in a different transaction and often a different tax year. That separation can leave room to claim an education credit on the tuition side in the same year you claim the bond exclusion on the contribution side.