Tax Advantages of Series EE Savings Bonds

Benefits New Investors Often Don't Know

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If you've already learned about Series EE savings bonds and you know how savings bond interest rates are determined, you'll want to learn about some of the major tax advantages.

Key Takeaways

  • Series EE savings bonds earnings can be exempt from state and local taxes.
  • If you invest in Series EE savings bonds for college, you can exclude part or all of the interest you earn over decades from your income taxes when the bonds are redeemed.
  • When investing for education, you can also put the Series EE savings bonds in the name of your child with the parents (you) listed as the beneficiary (not co-owner).

Exempt From State and Local Income Taxes

One big benefit of Series EE savings bonds is that they are exempt from state and local taxes. This is very important if you are in a high-income tax bracket or live in a state such as New York that levy a substantial income tax rate on high earners. The bottom line is that it a bond that's exempt from state and local taxes means more money in your pocket.

Defer Income Taxes Until Redemption or Up to 30 Years

You can choose to report the interest your bond earns each year on your taxes, or wait until you redeem the bond. If you elect to wait, you can defer payment of taxes on the interest income of your Series EE savings bonds until you redeem the bond, whether after one year or when the bond matures at 30 years.

Each savings bond is a zero-coupon bond. That means that you don't actually get checks in the mail for the interest you are owed like you would with a corporate bond or municipal bond. Instead, the value of the interest owed to you is added to the bond principal, and you get the interest when the bond matures or you redeem it.


Series EE savings bonds will pay interest for up to 30 years from the date they are issued.

Tax Benefits Based on Qualified Education Expenses

If you invest in Series EE savings bonds for college or other qualified education expenses, you can exclude part or all of the interest you earn over decades from your income taxes when you redeem the bonds. Some of the rules for this exclusion include:

  • You must redeem the Series EE savings bond in the same year you incur the expenses for post-secondary education, such as tuition and fees.
  • You must have been at least 24 years old before the bonds were issued.
  • The bonds must be registered directly in your name, or in your and your spouse's name if you are married.
  • Your filing status is not married filing separately.
  • For tax year 2022, your modified adjusted gross income (MAGI) has to be less than $158,650 if married and filing jointly and $100,800 for all other filing statuses.
  • The post-secondary institution that you attend must qualify for the Series EE savings bond program by being a university, college, or vocational school that meets federal assistance standards by offering programs such as guaranteed student loans from the Department of Education.


Qualified educational expenses and fees include tuition and fees, lab fees, and books. Room and board are not considered qualified education expenses.

The amount of qualified expenses is reduced by the sum of any tuition reduction the student received, including scholarships, employer-provided educational assistance, and fellowships. Both the principal and the interest of the EE savings bonds must be used to pay the qualified expenses to exclude the interest from your taxable income.

If your bond proceeds exceed your qualified education expenses, then you get a prorated interest exclusion based on the percentage of your expenses compared to your bond. For example, if your expenses were $7,000 and your bond proceeds were $8,000 ($4,000 principal, $4,000 in interest), you'd get to exclude 80% of the interest you earned, or $3,200.

Frequently Asked Questions (FAQs)

How do I avoid paying taxes on EE bonds?

You may be able to avoid taxes on EE bond interest, generally speaking, if you paid for qualified education expenses with your bond proceeds in the year that you redeem the bond.

What is the benefit of EE bonds?

EE bonds give you a safe way to invest money. If you hold on to the bond for at least, it will double in value. Additionally, you can avoid taxation on some or all of the interest you receive when you redeem the bond if you have qualified education expenses you paid for with your bond proceeds.

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  1. TreasuryDirect. "EE Bonds."

  2. New York State Department of Taxation and Finance. "2021 Tax Tables."

  3. TreasuryDirect. "Tax Information for EE and I Bonds."

  4. IRS. "26 CFR 601.602: Tax Forms and Instructions (2022)," Page 15.

  5. IRS. "Form 8815," Page 3.

  6. TreasuryDirect. "Using Savings Bonds for Education," Pages 1-2.

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