I-Bond sold in December of 2024 and rolled into a 529 plan in January 2025, tax reporting requirements

[ejtrauth]

My wife and I sold a portion of our I-Bonds in December 2024 and rolled these funds into 529 plans in January 2025 (within 60 days), with our grandkids being the specific account beneficiaries and we hold the ownership of these 529 accounts.   I received a 1099 from the US Treasury for the I-Bond transaction, how do I handle the 2024 tax requirements for this transaction?  Since I rolled these funds into a 529 plan, does this negate the need to pay tax on the interest earned from the i-Bonds?

[BrittanyS]

Yes, rolling over an I-Bond to a 529 plan does qualify for the tax exemption on the interest earned.  There are a few exceptions provided by Treasury Direct you want to keep in mind:

• "You were 24 years old or older before the bonds were issued.
• Your modified adjusted gross income is less than the cut-off amount that the IRS sets for the year in which you want to take the exclusion. The cut-off amount may change each year. You can find the current cut-off amount on IRS Form 8815.
• You cash the qualifying savings bonds in the same tax year for which you are claiming the exclusion.
• You paid qualified higher education expenses to an eligible institution that same tax year. (The instructions that come with IRS Form 8815 explain both "qualified expenses" and "eligible institution." They also tell you what records you must keep.)
• The expenses were for yourself, your spouse, or someone you list as a dependent on your federal income tax return.
• You file your IRS tax return with any status EXCEPT married filing separately."

To enter this in TurboTax you will fill out form 8815.  Follow these steps:

1. Click Federal Taxes
2. Click Wages & Income
3. Click Interest and Dividends section and click on the Start/Revisit box next to Interest on 1099-INT
    
4. On the Did you receive any interest income?  Click the Yes box.
5. On the Choose your bank or brokerage screen, click on the I'll type it in myself box.
6. If you've already entered interest, you will see Here's the interest we have so far. Click Edit next to your entry for the bonds. [or Add interest income if the interest in the table is not the bond interest.]
7. Enter Yes, I cashed Series EE or I Savings Bond
8. Mark box yes for "Did you use your U.S. savings bonds to pay for higher education expenses

TurboTax will automatically generate and populate Form 8815 for you.

See the link below for more information:

• Using Bonds for Higher Education