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Tax-wise ways to save for college

If you’re a parent or grandparent with college-bound children, you may want to save to fund future education costs. Here are several approaches to take maximum advantage of the tax-favored ways to save that may be available to you.


Savings bonds


Series EE U.S. savings bonds offer two tax-saving opportunities when used to finance college expenses:

  1. You don’t have to report the interest on the bonds for federal tax purposes until the bonds are cashed in, and

  2. Interest on “qualified” Series EE (and Series I) bonds may be exempt from federal tax if the bond proceeds are used for qualified college expenses.

To qualify for the college tax exemption, you must purchase the bonds in your own name (not the child’s) or jointly with your spouse. The proceeds must be used for tuition, fees, etc. — not room and board. If only some proceeds are used for qualified expenses, only that part of the interest is exempt.


If your modified adjusted gross income (MAGI) exceeds certain amounts, the exemption is phased out. For bonds cashed in 2023, the exemption begins to phase out when joint MAGI hits $137,800 for married joint filers ($91,850 for other returns) and is completely phased out if MAGI is $167,800 or more for joint filers ($106,850 or more for others).


Qualified tuition programs or 529 plans


Typically known as a “529 plans,” these programs allow you to buy tuition credits or make contributions to an account set up to meet a child’s future higher education expenses. 529 plans are established by state governments or private institutions.