Hello Turbo tax team,
I have a question related to purchase price/face value of US bonds added as income when deposited into a 529. If someone can give me a clear answer I would sincerely appreciate it.
I am taking the interest exclusion on a number US I bonds cashed and rolled into a NY529 for myself. I first opened a NY529 college saving plan for myself/ Some months after opening the 529 plan I cashed some US I bonds and was advised that I must deposit the full, total amounts (purchase price and interest) otherwise the full interest exclusion would not apply.
A few months prior to opening my 529 I cashed some US bonds and DID NOT include or deposit any of those funds into my 529 as it was beyond 60 days. The interest amount on these US bonds are taxable but the face or purchase amounts of these bonds are not calculated as addition income and the purchase price amounts have no impact on my taxable and non taxable Social Security amounts.
The I bonds cashed and deposited into my NY529 and form 8815 has the interest fully excluded from my income. However it appears the face amount or purchase prices of these bond have be added to my Social Security as taxable income. If someone could please explain or knows why US bond face purchase amounts, used for education are added to Social Security as income and reduces the non taxable SS amounts. US bonds cashed and NOT used for education do not have their purchase price amounts added as income. Tax was already paid on the funds used to purchase these all bonds already.
I can't understand how funds already taxed and treated as income is being treated as income a second time. Could this be a program issue with the data transfer form 8815? Again my sincere thanks.
