It depends on what kind of savings bond it is. Series EE bonds issued after 1989 and all Series I bonds can be redeemed and the assets used to fund a 529 plan without paying income tax on the interest. You have to redeem them, because 529 plans can only be funded with cash. There are also a number of requirements to qualify:
- Your modified adjusted gross income (MAGI) must be less than $92,550 ($146,300 if married filing jointly)
- The owner must be at least 24 years old before the bond's issue date
- Your filing status cannot be "married filing separately"
- You'll need to make the deposit within 60 days of cashing in the bonds
You'll need to file IRS Form 8815 to claim the exemption. There's also a great article her from Fastweb on the process. You can find additional details in IRS Publication 970 in Chapter 10.
VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.