How to File IRS Form 8815 for Education Expenses

Taxpayers who use certain savings bonds to pay for college may be able to exclude the bond interest from their income. IRS Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989, is used to calculate the amount of this exclusion. This tax benefit is subject to several specific requirements.

Determining Eligibility for the Exclusion

To claim the exclusion, several conditions must be met. The savings bonds must be either Series EE bonds issued after 1989 or any Series I bonds. The bond must be issued in the name of the taxpayer, or in the names of both the taxpayer and their spouse. Bonds registered in a child’s name do not qualify. The bond owner must have been at least 24 years old when the bond was issued.

The bond proceeds must be used to pay for qualified higher education expenses for the taxpayer, their spouse, or a dependent. Qualified expenses are defined as tuition and fees required for enrollment at an eligible educational institution. Expenses for room and board, or for courses related to sports or hobbies, are not qualified unless they are part of a degree program. An eligible educational institution is any accredited postsecondary institution that can participate in federal student aid programs.

A factor in determining eligibility is the taxpayer’s modified adjusted gross income (MAGI). The exclusion is phased out for taxpayers whose MAGI exceeds certain annual thresholds. For the 2024 tax year, the phase-out begins for single filers with a MAGI of $96,800 and is completely eliminated at $111,800. For those married filing jointly, the phase-out begins at $145,200 and is completely eliminated at $175,200. Taxpayers who are married but file separately cannot claim the exclusion.

Information and Documents Needed to Complete Form 8815

Before beginning Form 8815, gather the necessary financial records. You will need the total proceeds received from cashing in the qualified savings bonds during the tax year, which includes both principal and interest. The interest portion is reported to you on Form 1099-INT, Interest Income.

You will also need a detailed accounting of the qualified higher education expenses paid during the year, which should be for the same tax year in which you cashed the bonds. The primary document for this is often Form 1098-T, Tuition Statement. It is important to have receipts and canceled checks to substantiate the amounts paid.

Finally, you must account for any tax-free educational assistance the student received, such as scholarships, Pell Grants, and employer-provided educational assistance. These amounts reduce the total of your qualified higher education expenses, which can impact the size of your interest exclusion. Records of these benefits are necessary to complete the form.

Calculating the Exclusion on Form 8815

The calculation on Form 8815 is performed in two main parts. In Part I, you will enter the name of the student and the educational institution. You then list your total qualified higher education expenses, which are reduced by any tax-free educational assistance received. The result is your net qualified education expenses.

You will then compare these net expenses to the total proceeds from the bonds you cashed. If your net expenses are equal to or greater than the bond proceeds, all of the interest you earned may be excludable, subject to income limits. If the bond proceeds are more than your net expenses, you must perform a calculation to determine the percentage of interest that can be excluded.

Part II of the form applies the modified adjusted gross income (MAGI) limitation. You will enter your MAGI from your Form 1040 to see if you fall within the applicable phase-out range for your filing status. If your income is within this range, a calculation reduces your allowable exclusion. If your MAGI is above the upper limit for your filing status, your exclusion is reduced to zero.

Reporting the Exclusion on Your Tax Return

After you have completed Form 8815 and calculated the final excludable amount, you must report this figure on your federal income tax return. The exclusion is reported on Schedule B, Interest and Ordinary Dividends, not directly on Form 1040.

On Schedule B, you will first report the total interest from your savings bonds as shown on your Form 1099-INT. Then, on the line designated for excludable interest, you will subtract the amount calculated on Form 8815. You are required to write “Form 8815” in the space provided next to the amount.

The completed Form 8815 must be attached to your Form 1040 when you file your return. Failing to attach the form can lead to delays in processing your return or a disallowance of the exclusion.