Personal Finance Advice and Education! (3 Viewers)

[Tom Hagen]

Apologies if this is not the right forum for this. If so, just let me know and I will remove the post.

I posted earlier in the thread (quite a while back) about recharacterization. Full story. I did my taxes and filed and realized I had screwed up and filed my IRAs as Traditional rather than Roth. Realized the error and went in to Turbo Tax to edit it and refile and the software informed me I had made to much for Roth contributions, so I recharacterized them both fully to traditional. So that part is done. What I can't figure out now is, what the heck do I need to file? Neither of my brokerages provided any forms other than the statement showing the recharacterizations. I was expecting some forms of some sort. Anyways, it is done, I just need to file whatever I need to file to acknowledge what happened. I'm just not real sure what I need to do. Plan is to find a tax professional (CPA?) Monday if need be. But thought I'd check in here first and see if it was something simple I could do myself.

Thanks.

p.s. Avoiding jail for tax fraud is my to priority here.....

Just so I am clear can you answer a few questions:

1. The contributions and related earnings ended up in traditional IRA accounts, correct?

2. Were you eligible to deduct traditional IRA contributions in 2020?

3. If so, did you claim the deduction on your 2020 return?

You can PM me if you prefer.

 

[Orange&Blue]

Looking into these I-bonds.  Are they used just as an emergency type thing or are people using them for investments?  What's the tax implications and how long before they mature?

 

[Sand]

Looking into these I-bonds.  Are they used just as an emergency type thing or are people using them for investments?  What's the tax implications and how long before they mature?

I can't speak for anyone else - I'm definitely using these as an investment.  Buy in October, get 3.4% for 6 months and 7.2% for another 6 months?  Sign me up for a guaranteed 5%.

I believe maturity is 30 years and there are rules on redemptions (minimum 12 month hold, etc.).  They are an accrual type security, so you get the interest only when you redeem the bond.  This is great as you control the timing of the income.

Down on this page - a plot of I bonds vs other safe investments.  The only downside to these is the limitation of purchases per year.

 

[SFBayDuck]

It depends on what happens with inflation next year (and possibly future years if you hold long term). Buy in October and get 3.43% for October through March and then the new, higher rate for the following six months (April 2022 through September 2022). If inflation goes back to “normal”, it’s beneficial to be able to lock in both the  3.43% and the new 5%+ rate.

To make sure I'm understanding -

• Rates are set in May and November.
  
• If you buy in October, your rates are set in October (3.54) and April (7.12%)
  
• If you buy in November you know your rate is 7.12% through April 30, but the new rate is set May 1 for the following 6 months (unknown)
  
• Interest is compounded semi-annually, so by buying in October you get 10K plus the accrued interest when that 7.12% kicks in on April 1
  

So if you think we'll be at lower than 3.43% next May,  you'd buy in October instead of November.  Did I get that all right?

 

[Juxtatarot]

To make sure I'm understanding -

• Rates are set in May and November.
  
• If you buy in October, your rates are set in October (3.54) and April (7.12%)
  
• If you buy in November you know your rate is 7.12% through April 30, but the new rate is set May 1 for the following 6 months (unknown)
  
• Interest is compounded semi-annually, so by buying in October you get 10K plus the accrued interest when that 7.12% kicks in on April 1
  

So if you think we'll be at lower than 3.43% next May,  you'd buy in October instead of November.  Did I get that all right?

Yes, although even if you think inflation will continue to be high I’d argue that you should still lock in that 3.43% as long as you expect inflation to eventually fall to “normal” (2% or below?) while you hold the bond. If you think you might cash out in year 2 or 3, I can see waiting until November.

 

[Juxtatarot]

I can't speak for anyone else - I'm definitely using these as an investment.  Buy in October, get 3.4% for 6 months and 7.2% for another 6 months?  Sign me up for a guaranteed 5%.

I believe maturity is 30 years and there are rules on redemptions (minimum 12 month hold, etc.).  They are an accrual type security, so you get the interest only when you redeem the bond.  This is great as you control the timing of the income.

Down on this page - a plot of I bonds vs other safe investments.  The only downside to these is the limitation of purchases per year.

Someone mentions their experience purchasing that extra $5,000 in paper bonds on that page.  I have been considering doing that but it seems like such a hassle.

 

[DallasDMac]

Have not been following the thread to closely and it is WAY to big for me to try and catch up, so I'll just drop a message bomb and see if there is a quick and easy answer. I have money that is going to waste sitting in savings. I want to invest it in something, but I need something safe and easy to access as I may well retire in March and need it for the purchase of a home. CD rates suck as do money market rates. I need something(s) that really don't have to much in the way of upper limits as I have about $100k to invest. I was thinking maybe just a general total bond index fund with Vanguard or something along those lines. Any thoughts? Oh, IRA and 401(k) stuff is all maxed already, so those aren't options.

Thanks.

p.s. Special thanks to Tom for his help with my earlier post.

 

[stbugs]

Have not been following the thread to closely and it is WAY to big for me to try and catch up, so I'll just drop a message bomb and see if there is a quick and easy answer. I have money that is going to waste sitting in savings. I want to invest it in something, but I need something safe and easy to access as I may well retire in March and need it for the purchase of a home. CD rates suck as do money market rates. I need something(s) that really don't have to much in the way of upper limits as I have about $100k to invest. I was thinking maybe just a general total bond index fund with Vanguard or something along those lines. Any thoughts? Oh, IRA and 401(k) stuff is all maxed already, so those aren't options.

Thanks.

p.s. Special thanks to Tom for his help with my earlier post.

If you have the time you can get 5% or so on I-Bonds. I haven’t used them because the free cash I have is either for college/normal expenses or money I would dump in stocks if there was a big dip. With that 7% interest starting in November I am very tempted.

 

[Juxtatarot]

Have not been following the thread to closely and it is WAY to big for me to try and catch up, so I'll just drop a message bomb and see if there is a quick and easy answer. I have money that is going to waste sitting in savings. I want to invest it in something, but I need something safe and easy to access as I may well retire in March and need it for the purchase of a home. CD rates suck as do money market rates. I need something(s) that really don't have to much in the way of upper limits as I have about $100k to invest. I was thinking maybe just a general total bond index fund with Vanguard or something along those lines. Any thoughts? Oh, IRA and 401(k) stuff is all maxed already, so those aren't options.

Thanks.

p.s. Special thanks to Tom for his help with my earlier post.

For just 6 months? Keep it in a high yield savings account and accept the 0.5%.

 

[Orange&Blue]

Someone mentions their experience purchasing that extra $5,000 in paper bonds on that page.  I have been considering doing that but it seems like such a hassle.

Paper bonds?  Why not electronic?

 

[Juxtatarot]

Paper bonds?  Why not electronic?

There is a $10,000 annual maximum for electronic  I Bonds.

 

[Juxtatarot]

@Orange&Blue  Here's a good primer:  https://tipswatch.com/2021/09/26/i-bond-manifesto-why-inflation-linked-savings-bonds-can-work-as-part-of-your-emergency-fund/

 

[DallasDMac]

For just 6 months? Keep it in a high yield savings account and accept the 0.5%.

Yea, this is one way I was leaning. As much as it hurts me to do so.

 

[gianmarco]

Yes, although even if you think inflation will continue to be high I’d argue that you should still lock in that 3.43% as long as you expect inflation to eventually fall to “normal” (2% or below?) while you hold the bond. If you think you might cash out in year 2 or 3, I can see waiting until November.

I'm looking into this now.  At this point with where rates are, if I were to go this route with some savings, would I want to buy now in October?  Or wait?

 

[Juxtatarot]

I'm looking into this now.  At this point with where rates are, if I were to go this route with some savings, would I want to buy now in October?  Or wait?

Now. 

 

[SFBayDuck]

When you want to redeem/cash out an iBond, do you have to redeem the entire thing?  So if I buy a $10K iBond and in 5 years want to redeem it, can I take out just $5K or do I have to cash out the whole thing?

Assuming you'd have to fully cash out, I would think I'd want to buy two $5K bonds just for some additional flexibility, especially considering I'm thinkin of slowly moving my emergency funds into these.

 

[Juxtatarot]

When you want to redeem/cash out an iBond, do you have to redeem the entire thing?  So if I buy a $10K iBond and in 5 years want to redeem it, can I take out just $5K or do I have to cash out the whole thing?

Assuming you'd have to fully cash out, I would think I'd want to buy two $5K bonds just for some additional flexibility, especially considering I'm thinkin of slowly moving my emergency funds into these.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iredeem.htm

You can cash a minimum of $25 or any amount above that in 1-cent increments. If you cash only a portion of the bond’s value, you must leave at least $25 in the TreasuryDirect account.  Redemptions are comprised of principal and interest. (In a partial redemption, we pay interest only on the partial amount you cash.)

 

[coopersdad]

Mother (76) just sold her home and moved into a senior living apartment complex.  Her social security + 401K will almost meet her monthly living expenses (rent / food / entertainment / etc) but she may need to draw an additional 300-500 / month depending upon the situation / month (christmas / travel / etc).  

She netted about $200K on the sale of her house, and that cash is sitting in her checking account.  She has a money market account w/ approx $80K in it that has been producing about $60-$150 / month in income. She has been able to increase that account w/ her excess SS/401K (she had no house payments, only taxes / insurance).

Should we just transfer the proceeds into that MM account?  There are no fees for transactions or transfers to her checking.  I don't want to make it to complicated for her, as she's onset Parkinson and gets frustrated not seeing where her $'s are (and I mean on a daily basis she's checking to make sure "the bank doesn't eff something up". 

thanks in advance.

 

[ConstruxBoy]

Mother (76) just sold her home and moved into a senior living apartment complex.  Her social security + 401K will almost meet her monthly living expenses (rent / food / entertainment / etc) but she may need to draw an additional 300-500 / month depending upon the situation / month (christmas / travel / etc).  

She netted about $200K on the sale of her house, and that cash is sitting in her checking account.  She has a money market account w/ approx $80K in it that has been producing about $60-$150 / month in income. She has been able to increase that account w/ her excess SS/401K (she had no house payments, only taxes / insurance).

Should we just transfer the proceeds into that MM account?  There are no fees for transactions or transfers to her checking.  I don't want to make it to complicated for her, as she's onset Parkinson and gets frustrated not seeing where her $'s are (and I mean on a daily basis she's checking to make sure "the bank doesn't eff something up". 

thanks in advance.

Based on your last few sentences, that's what I would do. There are some other things you could do that might be slightly more risk but come closer to matching inflation, but I think that in her circumstance, just keep it simple. 

 

[BassNBrew]

I'm looking into this now.  At this point with where rates are, if I were to go this route with some savings, would I want to buy now in October?  Or wait?

Now. 

someone mentioned above that if you buy in October the rate for the first six months is 3.4% and jumps to 7.12% in April. If you wait until November you will get 7.12% immediately but then it could reset lower in May.  
 

I want to buy a house with these funds in 1-3 years so this isn’t long term money.  Seems like with the benefit of compounding if you expect inflation to stay above 2% you should likely wait until November.  Also if the yield crashes you could always cash out and invest elsewhere. 
 

I guess I could do 5 in October and 5 in November.  Would love to hear some more discussion. 

 

[gianmarco]

someone mentioned above that if you buy in October the rate for the first six months is 3.4% and jumps to 7.12% in April. If you wait until November you will get 7.12% immediately but then it could reset lower in May.  
 

I want to buy a house with these funds in 1-3 years so this isn’t long term money.  Seems like with the benefit of compounding if you expect inflation to stay above 2% you should likely wait until November.  Also if the yield crashes you could always cash out and invest elsewhere. 
 

I guess I could do 5 in October and 5 in November.  Would love to hear some more discussion. 

Thanks for the question.

Also, if I wanted to do another purchase next year, assuming I buy $20K this year (married), when is the best time to buy the next $20K in 2022?

 

[Juxtatarot]

Thanks for the question.

Also, if I wanted to do another purchase next year, assuming I buy $20K this year (married), when is the best time to buy the next $20K in 2022?

End of January. Why wait? (There can be a slight advantage of waiting toward the end of the month since you’ll get interest for the whole month. Of course, if the money is sitting in a non-interest checking account, it doesn’t matter.)

 

[Juxtatarot]

someone mentioned above that if you buy in October the rate for the first six months is 3.4% and jumps to 7.12% in April. If you wait until November you will get 7.12% immediately but then it could reset lower in May.  
 

I want to buy a house with these funds in 1-3 years so this isn’t long term money.  Seems like with the benefit of compounding if you expect inflation to stay above 2% you should likely wait until November.  Also if the yield crashes you could always cash out and invest elsewhere. 
 

I guess I could do 5 in October and 5 in November.  Would love to hear some more discussion. 

Compounding in the short-term isn’t that much of a factor. But, yes, if you think inflation will stay high, you could wind off better in the short run by waiting until November. 

 

[BassNBrew]

Compounding in the short-term isn’t that much of a factor. But, yes, if you think inflation will stay high, you could wind off better in the short run by waiting until November. 

Thanks for the reply, I may hedge half and half.   
 

speaking of hedges, if you wait and lose out on total return because inflation falls, you’ll probably come out ahead on what you save in gas and food expenses 

 

[Sand]

End of January. Why wait? (There can be a slight advantage of waiting toward the end of the month since you’ll get interest for the whole month. Of course, if the money is sitting in a non-interest checking account, it doesn’t matter.)

I'm going to buy in January.  Not looking a gift horse in the mouth.  The interest on these has far eclipsed any CD or MM account and is 100% safe.  

 

[gianmarco]

There is a $10,000 annual maximum for electronic  I Bonds.

I just found out something regarding this.

If you're married, you can get $10,000 for each spouse.  That was already talked about.  However, if you have a trust set up for your family, you can get an additional $10,000 under the trust even if it's listed under the same SSN as one of the spouses for a total of $30,000 per year (ignoring the $5,000 paper bonds using a tax return).

 

[SFBayDuck]

Thanks for the reply, I may hedge half and half.   
 

speaking of hedges, if you wait and lose out on total return because inflation falls, you’ll probably come out ahead on what you save in gas and food expenses 

That’s what I ended up doing - bought $5K this week and set an auto purchase of the other $5K in late November. 
 

 

[Random]

Very new to bond investing, interested in the I bond being discussed.  

I'm still not understanding the logic for buying the Oct 3.4% as opposed to waiting a week and getting the 7.12%.  Could someone show me the math?

Funds will be coming from a investment property sale, likely just sitting in a checking account.  Could be invested for emergency fund, retirement (all tax advantaged/college accounts are maxed) or a vacation house purchase in the next few years.  I'd like to do $20k this year and in Jan.

 

[gianmarco]

Very new to bond investing, interested in the I bond being discussed.  

I'm still not understanding the logic for buying the Oct 3.4% as opposed to waiting a week and getting the 7.12%.  Could someone show me the math?

Funds will be coming from a investment property sale, likely just sitting in a checking account.  Could be invested for emergency fund, retirement (all tax advantaged/college accounts are maxed) or a vacation house purchase in the next few years.  I'd like to do $20k this year and in Jan.

Assuming I have this correct.

The 3.54% for the next 6 months is locked in.  Then so is the 7.12%.  So it's a combined 5.39% for 12 months.

If you buy in November, you get the 7.12% for 6 months, but the following 6 months are unknown and could be lower than 3.54% (which is still pretty good).  So it's more of a gamble.  In other words, if that were to drop to 0%, as an extreme, then you're getting 3.56% for 12 months. 

 

[gianmarco]

I just found out something regarding this.

If you're married, you can get $10,000 for each spouse.  That was already talked about.  However, if you have a trust set up for your family, you can get an additional $10,000 under the trust even if it's listed under the same SSN as one of the spouses for a total of $30,000 per year (ignoring the $5,000 paper bonds using a tax return).

To take this a step further, you can actually get up to $65,000.

You can get $10,000 for each spouse.  If each spouse has a trust, each of those can get $10,000.  And then you can also get it as a self-employed business for $10,000 each (if each spouse has a business under their name).  Plus the $5,000 using a tax return for paper bonds.

A little more info on i-bonds

 

[Juxtatarot]

Assuming I have this correct.

The 3.54% for the next 6 months is locked in.  Then so is the 7.12%.  So it's a combined 5.39% for 12 months.

If you buy in November, you get the 7.12% for 6 months, but the following 6 months are unknown and could be lower than 3.54% (which is still pretty good).  So it's more of a gamble.  In other words, if that were to drop to 0%, as an extreme, then you're getting 3.56% for 12 months. 

Yes, and even if inflation continues to be high the next few semiannual periods, eventually it should go back to normal as supply chain issues are resolved. If they aren’t, we have bigger problems.

You’re right that 3.54% is a fantastic risk free rate as the best high yield savings accounts are only earning about 0.5%, the 10-year treasury is only at 1.65% and the Fed isn’t expected to dramatically raise rates anytime soon.

If people think they will only keep these I bonds for a few years, I guess I can understand gambling that inflation will stay high.  However, if one’s time horizon is longer, it seems like a no-brainer to lock in the 3.54%.

 

[gianmarco]

If people think they will only keep these I bonds for a few years, I guess I can understand gambling that inflation will stay high.  However, if one’s time horizon is longer, it seems like a no-brainer to lock in the 3.54%.

Can you explain this part here?  How does keeping them a few years vs. longer factor into the decision?  I thought the 3.54% is only for this next 6 months.  Is there another part that matters longer term?

 

[gianmarco]

This i-bond stuff is fascinating to me.

Just found this that discussed buying late October vs. November

 

[Juxtatarot]

Can you explain this part here?  How does keeping them a few years vs. longer factor into the decision?  I thought the 3.54% is only for this next 6 months.  Is there another part that matters longer term?

Just for an easy hypothetical, let’s say that inflation is 5% for two years, then falls to 1%. If someone were to cash out at the end of the 5% years, they would be better off forgoing the 3.54%. If we keep them when it’s 1% or even just ride out that 5% for our additional 6 months, we’d be glad we had that 3.54%.

 

[Juxtatarot]

This i-bond stuff is fascinating to me.

Just found this that discussed buying late October vs. November

 Yeah, he seems to make this more complicated than it needs to be, but he’s right.

 

[NutterButter]

Sounds like these ibonds are great place to dump some money that I had targeted for a 529 and will need in a few years.  Added perk that earnings are entirely tax exempt if used for education.   

 

[Runkle]

I have a 30-year fixed mortgage at 2.75% and this is why I refuse to pay it off early at all. I can take extra money that would go to the mortgage and instead earn 7% guaranteed from the feds? Sign me the #### up. 

 

[gruecd]

I have a 30-year fixed mortgage at 2.75% and this is why I refuse to pay it off early at all. I can take extra money that would go to the mortgage and instead earn 7% guaranteed from the feds? Sign me the #### up. 

You can earn 7% guaranteed in the short-term, or you could stick it in an S&P 500 index fund that's returned an average annual return of almost 8% over the last 20 years.

 

[Runkle]

You can earn 7% guaranteed in the short-term, or you could stick it in an S&P 500 index fund that's returned an average annual return of almost 8% over the last 20 years.

Exactly. Paying off a mortgage seems to be the least useful application of my money. 

 

[Chadstroma]

At these rates (even now which is a little higher than they were a few months ago) I can't see a numerical reason why you would burn cash flow into paying off a mortgage early. We even opted yo stay a 30 yr on my own refinance versus a 20 or 15 yr term in order to max cash flow to increase investments. 

That being said, not everyone is the same and for some there is a psychological benefit of paying off the mortgage earlier that no amount of math can overcome. Someones mental well being is more important than their bank accounts well being. If someone can not be won over by the cold numbers and logic then I am not against them paying off the mortgage early. 

 

[Juxtatarot]

At these rates (even now which is a little higher than they were a few months ago) I can't see a numerical reason why you would burn cash flow into paying off a mortgage early. We even opted yo stay a 30 yr on my own refinance versus a 20 or 15 yr term in order to max cash flow to increase investments. 

That being said, not everyone is the same and for some there is a psychological benefit of paying off the mortgage earlier that no amount of math can overcome. Someones mental well being is more important than their bank accounts well being. If someone can not be won over by the cold numbers and logic then I am not against them paying off the mortgage early. 

It can be rational to have risk free funds.

The I Bond rate being discussed is certainly abnormal but typically one’s mortgage rate is going to be higher than the going risk free rate even adjusting for tax consequences. There can be some liquidity concerns with paying down a mortgage, but “cold numbers” can certainly show an advantage in prepayment over the APY of your typical money market account or high yield savings account.

 

[Random]

I enjoy the paid off mortgage debate.  I paid mine off a few years ago and have absolutely no regrets.  Things you cant (or dont) factor in aside from the pure satisfaction of having a paid off mortgage.

1) No more life insurance.  For us, its simply not needed.  We can cash flow our current lifestyle on less than one income.

2) No more bonds in our retirement accounts.  The paid off house is our safety net.

3) We can enjoy our money now (40's), as opposed to waiting until we can draw from our retirement accounts.

I'm sure theres more, these are just off the top of my head.  Most only use mortgage rate vs investment return. 

 

[stbugs]

I enjoy the paid off mortgage debate.  I paid mine off a few years ago and have absolutely no regrets.  Things you cant (or dont) factor in aside from the pure satisfaction of having a paid off mortgage.

1) No more life insurance.  For us, its simply not needed.  We can cash flow our current lifestyle on less than one income.

2) No more bonds in our retirement accounts.  The paid off house is our safety net.

3) We can enjoy our money now (40's), as opposed to waiting until we can draw from our retirement accounts.

I'm sure theres more, these are just off the top of my head.  Most only use mortgage rate vs investment return. 

What does 3 have to do with paying off your mortgage? First, funding your retirement, likely due to a match or to save on current high tax rates or taking advantage of a Roth, is done first. The payoff money would go in a brokerage account. Second, you’d have more free cash if you had the money that you used to pay down the mortgage. That’s the point of getting a better return on your money than the mortgage interest and basically having a nice nut of extra cash left over after paying off the mortgage via payments.

All that said, that was for the last decade. Paying off the mortgage in 2011 would have been a good feeling but over the last decade you had 14% annual returns or a 280% total return. For a 30 year mortgage, you could probably use the 4% to pay the monthly payment and still have gotten 10%+ (compounding) a year thus having around double your money at the end of the decade while making every payment. You might have been able to take half right now and pay the rest off, this paying off your mortgage with the decade of gains and still have the entire principal right now.

For this decade, I’d be more willing to pay off the mortgage because we’ve had such great returns the past decade, but last decade you would have killed it by investing the payoff and skimming the return to pay the mortgage. 

 

[tonydead]

Generally true, at least the current proposals.  The mega backdoor Roth is completely out.  The regular backdoor - put money into a traditional IRA, then convert it to a Roth, is out if those contributions are after tax.  Regular conversions are fine (IRA to Roth) if you make less than 400k.  

Not telling if these will hold up. 

ETA:  Good rundown of all the stuff that's being discussed.

This crap is in the reconciliation bill not the infrastructure bill, right?  I'd be flabbergasted if the heavy hitters let these doors slam shut.

 

[SFBayDuck]

Sounds like these ibonds are great place to dump some money that I had targeted for a 529 and will need in a few years.  Added perk that earnings are entirely tax exempt if used for education.   

I was looking at that too, but there is an income limit to this -  $97,350 or more if single, head of household, or qualifying widow(er); or $153,550 or more if married filing jointly,

So then I was thinking I’d just put it in my daughter’s name, but then found that you have to be 24 for that tax exempt status. 
 

 

[Sand]

This crap is in the reconciliation bill not the infrastructure bill, right?  I'd be flabbergasted if the heavy hitters let these doors slam shut.

Yes, it's in the big bill.

 

[Orange&Blue]

Assuming I have this correct.

The 3.54% for the next 6 months is locked in.  Then so is the 7.12%.  So it's a combined 5.39% for 12 months.

If you buy in November, you get the 7.12% for 6 months, but the following 6 months are unknown and could be lower than 3.54% (which is still pretty good).  So it's more of a gamble.  In other words, if that were to drop to 0%, as an extreme, then you're getting 3.56% for 12 months. 

With the shortages going around, covid still in full swing, gas prices rising....how is inflation not going to be a problem?

 

[Orange&Blue]

Sounds like these ibonds are great place to dump some money that I had targeted for a 529 and will need in a few years.  Added perk that earnings are entirely tax exempt if used for education.   

 Wait, exempt if used for education?  What level and does that include kids?  What's the income cap?

 

[Runkle]

 Wait, exempt if used for education?  What level and does that include kids?

Education Planning

Education Tax Exclusion

The education tax exclusion permits qualified taxpayers to exclude from their gross income all or part of the interest paid upon the redemption of eligible savings bonds, when the bond owner pays qualified higher education expenses at an eligible institution.

Who Can Take the Exclusion

You can take the exclusion if all five of the following apply:

• You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
  
• You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
  
• Your filing status is any status except married filing separately.
  
• Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. See IRS Form 8815 for the current amount.
  
• You were 24 or older before your savings bonds were issued.
  

Savings Bonds That Qualify for the Exclusion

To qualify for the exclusion, the bonds must be Series EE or Series I savings bonds issued after 1989 in your name, or, if you are married, they may be issued in your name and your spouse's name. Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.

More Information

For more information on the exclusion, see IRS Form 8815.

To apply for the exclusion, attach IRS Form 8815 to IRS Form 1040 or IRS Form 1040-SR and send both to the Internal Revenue Service.

https://www.treasurydirect.gov/indiv/planning/plan_education.htm

8815 (line 9 is your modified AGI):

Note: If line 9 is $97,350 or more if single, head of household, or qualifying widow(er); or $153,550 or more if married filing jointly, stop. You cannot take the exclusion.

 

[NutterButter]

I was looking at that too, but there is an income limit to this -  $97,350 or more if single, head of household, or qualifying widow(er); or $153,550 or more if married filing jointly,

So then I was thinking I’d just put it in my daughter’s name, but then found that you have to be 24 for that tax exempt status. 
 

Doh.   So much for the exemption.