How to Transfer U.S. Savings Bonds Into a 529 Plan. Certain types of U.S. Savings Bonds can be rolled into a 529 education plan to pay for college tuition. Since savings bonds are undersigned by the U.S. government, they provide a secure method of saving for higher education. However, there are restrictions and limitations to be aware of while considering transfer of U.S. Savings Bonds into a 529 plan.
Check the savings bonds' series definition to make sure they qualify for transfer into a 529 plan. Only series I and series EE bonds issued after 1989 are eligible to be rolled over to a 529 plan. Ensure that the owner of the bonds was at least 24 years old on the day they were issued and the child who will be using the funds for education purpose is listed as a beneficiary.
Read Publication 970 issued by the Internal Revenue Service (IRS) to find out earning limits on educational savings bonds. The publication is available for download at the IRS website (see Resources below). The earning limits can change from year to year, so make sure you are looking at the numbers for the current year. Ensure that the total earnings you are declaring on your tax returns are within the limits stipulated by IRS.
Fill out and submit the Higher Education 529 Fund Enrollment Form along with the Transfer/Rollover form. These forms will be available at the financial institution administering your 529 plan. While transferring, you will need to specify the U.S. Savings Bonds' redemption amount.
File a joint tax return, if you are married. You must do so to qualify for tax exclusion on the redemption of the savings bonds. If you are planning education for your child, the bonds must be registered in either your or your spouse's name.
File Form 8815 with your tax returns. This will ensure that the redemption from the savings bonds are marked as being rolled over to a 529 plan and hence retain the tax benefits. You can download the form from the website of Internal Revenue Service.
Check the website of the U.S. Department of Treasury for more details on the rules governing the transfer of U.S. Savings Bonds into a 529 account (see Resources below).
Remember that to qualify for tax exclusion, the educational expenses must occur in the same tax year that you transfer the U.S. Saving Bonds to the 529 plan.