Can I reinvest savings bonds into anything so the interest does not get taxed?

Question:I have quite a few savings bonds that were bought by me and/or given as gifts for my kids for their education. They have both graduated college and we did not use them all. I would like to cash them and give the money to my kids, but I don't want to get socked with all that interest. Can I reinvest the money into something so that it does not get taxed?

I know the kind of bonds you mean. I have a pile of them for my own kids' college educations which are coming up in the next few years. If yours are the same, they are EE bought under YOUR name (not your child's), but they are marked under a special educational provision so that as long as you use them for college expenses for your children, their interest is not taxed.

The short answer, I think, is that if you cash them out and don't spend them on education expenses, you have to pay tax on the interest. My only suggestion would be to take all of the money and buy an IRA with it, if you are eligable to deduct IRA contributions from your income to avoid tax. If you make
over certain income limits, or are covered by a company IRA or 401k plan, you usually can't take advantage of the IRA tax benefits, but maybe you do not fall into those categories.
If they bonds from the government, they are completely exempt from tax so you probably have nothing to worry about.

This article contents is post by this website user, doesn't promise its accuracy.

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