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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > savings bonds
Expert: Helen P. O`Planick, EA
Date: 9/20/2008
Subject: savings bonds
Question
Hi Helen. First let me say thank you for volunteering to answer all these questions. I really appreciate you taking your time to help people (including me) that you don't even know. I'm from PA too but I don't think that will affect the answer to my question. Anyway, when my first daughter was born, almost 19 years ago, my wife started buying EE savings bonds for her through a payroll deduction with the intended use being college. My wife swears she was told to put my daughter as the primary owner with my wife being co-owner. Now we need to start cashing the bonds for college and we're being told that my daughter's name should never have been put on the bond in order for us to get a tax deduction. Also, any interest earned would be charged to my daughter and count against the $2,500 allowed for FAFSA. How badly did we screw up and can we fix this? Again, thank you for your time. Jeff
Answer
Jeff, you can't fix it. The interest, if you decide to cash them in, is your daughter's, so it will be less tax then on your return, but you cannot exclude the interest for college as you would have been able to had they been in your name (or your wife's). The good news is way back then, the savings bonds for college thing was not even in the picture.
So either your daughter has investments that need reported on the FASFA, or income that is taxable to her. Remember the learning credits are not affected, so you still have those.
Helen, EA in York PA
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